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Home My WebLink AboutAPP_13009-Kawerak Pilgrim Hot Springs REF Application Alaska Energy Authority Attn: Karin St. Clair, Grants Manager 813 W Northern Lights Blvd Anchorage, AK 99503 grants@akenergyauthority.org September 28, 2020 Ms. St. Clair, I am pleased to provide authorization and approval for Kawerak’s application to the 2020 Alaska Energy Authority Renewable Energy Fund, Round 13 for the “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” project in the amount of $368,822. As President and CEO of our tribal consortium, as mandated by our Board of Directors, I have the authority to sign on behalf of our corporation for all grant applications and agreements. Kawerak, Inc. is compliant with applicable federal, state, and local, laws including existing credit and federal tax obligations. Our most recent financial statement and audit is included with this application package for your reference. We are committed financially to the success of this project, and plan to begin work immediately with the Alaska Center for Energy and Power (ACEP) under our current technical assistance contract with funding through the Department of Energy-Office of Indian Energy. As described in the attached documentation, Kawerak will utilize up to $25,000 of their technical assistance contract funds for this effort. As additional match, Kawerak will contribute a salary and fringe match of up to $22,811.63 for the project manager, and up to $13,800 for project staff support, for a total match of $36,611.63, which is provided by Kawerak through a co-manager agreement with Unaatuq, LLC. Pending match includes the Tribal Energy Development Capacity Grant. If awarded, Kawerak will act as a sub-grantee to the Native Village of Mary’s Igloo and contract Deerstone Consulting for economic development analysis work that would contribute greatly to the overall goals of the REF project. If awarded, this funding opportunity would present $75,281.25 in matching funds. If you have questions on this grant application, please contact: Amanda Toerdal, Pilgrim Hot Springs General Manager atoerdal@kawerak.org 907-443-4278 Thank you for the opportunity to share our proposal. Sincerely, Melanie Bahnke CEO/President REPRESENTING) Brevig'Mission' Sitaisaq) Council' Diomede' Ifaliq) Elim' Niviarcaurluq) Gambell' Sivuqaq) Golovin' Chinik) King'Island' Ugiuvak) Koyuk' Kuuyuk) Mary’s'Igloo' Qawiaraq) Nome'Eskimo' Sitnasuak)Inuit) Savoonga' Sivungaq) Shaktoolik' Saktuliq) Shishmaref' Qikiqtaq) Solomon' Afuutaq) St.'Michael' Taciq) Stebbins' Tapraq ) Teller' Tala) Unalakleet' Ufalaqłiq) Wales' Kifigin) White'Mountain' Iġałuik)/) Nutchirviq) Advancing)the)capacity)of)our)people)and)tribes)for)the)benefit)of)the)region. PO)Box)948)•)Nome)Alaska)99762)•)907.443.5231)•)www.kawerak.org)) Alaska Energy Authority 813 W Northern Lights Blvd Anchorage, AK 99503 grants@akenergyauthority.org September 27, 2020 To Whom It May Concern, Kawerak’s grant with the Department of Energy Office of Indian Energy (DOE OIE) funds Kawerak’s Energy Program and allows for technical assistance and planning for energy projects within the Bering Strait Region. Kawerak’s Energy Program originally contracted with the Alaska Center for Energy and Power (ACEP) in 2017 to provide high-level technical assistance for energy projects for a total amount of $90,000. At present, we have a current balance of $49,000 remaining with an end date of Sept. 1, 2021, the final month of Kawerak’s DOE OIE grant. We are pleased to dedicate $25,000 of the current ACEP contract for the technical work that needs to be done to further the “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” and plan to begin work on the effort as soon as possible to contribute to the project goals. Because of Covid-19, the in-person work we had scheduled with ACEP for the 2020 calendar year has not been realized and we can afford to designate these funds for this important project. The mission of the Unaatuq Board of Directors is to serve the people of the Bering Strait Region, through safe, responsible resource development that benefits the wellbeing of current and future generations. Moving forward with this important project at Pilgrim Hot Springs is in line with our energy program’s mission to serve the people of our region, and helps to ensure that we are working to further the board’s mission. _____________________________ __________ Anahma Shannon, Date Director, Kawerak Environmental Program _____________________________ __________ Melanie Bahnke, Date President, Kawerak, Inc. 9/28/2020 9/28/2020 Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 1 of 35 7/20/2020 SECTION 1 – APPLICANT INFORMATION Name: Kawerak, Inc. Tax ID # 92-0047009 Date of last financial statement audit: 12/31/2019 Mailing Address: Physical Address: PO Box 948 500 Seppala Drive Nome, AK Nome, AK 99762-0948 99762 Telephone: Fax: Email: 907-443-5231 907-443-4452 mbahnke@kawerak.org 1.1 Applicant Point of Contact / Grants Manager Name: Title: Amanda Toerdal Pilgrim Hot Springs General Manager Mailing Address: 500 Seppala Drive | P.O. Box 948 | Nome, AK 99762 Telephone: eFax: Email: 907-443-4278 907-308-6822 atoerdal@kawerak.org 1.1.1 Applicant Signatory Authority Contact Information Name: Title: Melanie Bahnke President/CEO Mailing Address: 500 Seppala Drive | P.O. Box 948 | Nome, AK 99762 Telephone: Fax: Email: 907-443-5231 907-443-4452 mbahnke@kawerak.org 1.1.2 Applicant Alternate Points of Contact Name Telephone: Fax: Email: Anahma Shannon 907-443-4249 443-4452 ashannon@kawerak.org Donna Ray 907-443-4266 443-4452 cfo@kawerak.org Donna James 907-434-0709 443-4452 djames@kawerak.org Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 2 of 35 7/20/2020 1.2 Applicant Minimum Requirements 1.2.1 Applicant Type ☐ An electric utility holding a certificate of public convenience and necessity under AS 42.05 CPCN #______, or ☐ An independent power producer in accordance with 3 AAC 107.695 (a) (1) CPCN #______, or ☐ A local government, or ☒ A governmental entity (which includes tribal councils and housing authorities) Additional minimum requirements ☒ 1.2.2 Attached to this application is formal approval and endorsement for the project by the applicant’s board of directors, executive management, or other governing authority. If the applicant is a collaborative grouping, a formal approval from each participant’s governing authority is necessary. (Indicate yes by checking the box) ☒ 1.2.3 As an applicant, we have administrative and financial management systems and follow procurement standards that comply with the standards set forth in the grant agreement (Section 3 of the RFA). (Indicate yes by checking the box) ☒ 1.2.4 If awarded the grant, we can comply with all terms and conditions of the award as identified in the Standard Grant Agreement template at www.akenergyauthority.org/what-we- do/grants-loans/renewable-energy-fund-ref-grants/2020-ref-application (Any exceptions should be clearly noted and submitted with the application.) (Indicate yes by checking the box) ☒ 1.2.5 We intend to own and operate any project that may be constructed with grant funds for the benefit of the general public. If no please describe the nature of the project and who will be the primary beneficiaries. (Indicate yes by checking the box) Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 3 of 35 7/20/2020 SECTION 2 – PROJECT SUMMARY 2.1 Project Title Pilgrim Hot Springs Geothermal Power Plant Conceptual Design 2.2 Project Location 2.2.1 Location of Project Latitude 65°05'27.8"N Longitude 164°55'38.3"W Pilgrim Hot Springs is a 320-acre property owned by Unaatuq, LLC. It is located approximately 60 road miles north of Nome, Alaska. Mary’s Igloo is the closest “village” to the property, and Unaatuq land is bordered exclusively by Mary’s Igloo Native Corporation land. The coordinates given are the approximate location of the current geothermal production well, and the site of the future geothermal power plant facility. 2.2.2 Community benefiting Bering Strait Region (Nome Census Tract) Unaatuq, LLC owners: Kawerak, Inc., Bering Straits Native Corporation, Sitnasuak Native Corporation, Norton Sound Economic Development Corporation, Council Native Corporation, Mary’s Igloo Native Corporation, White Mountain Native Corporation 2.3 Project Type 2.3.1 Renewable Resource Type ☐ Wind ☐ Biomass or Biofuels (excluding heat-only) ☐ Hydro, Including Run of River ☐ Hydrokinetic ☒ Geothermal, Excluding Heat Pumps ☐ Transmission of Renewable Energy ☐ Solar Photovoltaic ☐ Storage of Renewable ☐ Other (Describe) ☐ Small Natural Gas 2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply) Pre-Construction Construction ☐ Reconnaissance ☐ Final Design and Permitting ☒ Feasibility and Conceptual Design ☐ Construction Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 4 of 35 7/20/2020 2.4 Project Description The “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” project will allow stakeholders in the Bering Strait Region the chance to design an on-site power and heat production facility for Pilgrim Hot Springs. The property is owned by Unaatuq, LLC, a consortium of seven regional and local entities, including five Alaska Native Corporations, one Tribal Consortium (Kawerak), and a non-profit regional CDQ corporation. Kawerak acts as a co-managing owner of the property, along with Bering Straits Native Corporation, and will manage the Renewable Energy Fund grant and project activities. Kawerak, Inc. will work with the Alaska Center for Energy and Power as their main technical contractor, and hire a full-service engineering firm to provide various task as described in the scope of work. By providing sustainable, clean energy to Pilgrim Hot Springs using the existing and abundant geothermal resource on site, business development activities may continue to grow and bring economic benefit to all residents of the Bering Strait Region. 2.5 Scope of Work See attached: Detailed scope of work for Kawerak REF Project Kawerak, Inc. requests $368,822 from Alaska Energy Authority’s Renewable Energy Fund in order to complete the conceptual design of a geothermal power plant for Pilgrim Hot Springs, including both energy and heat production. Kawerak plans to use grant funds for project management personnel, materials and supplies, and contractual services. Alaska Center for Energy and Power (ACEP) will be the main contractor for this project, based on their experience with geothermal systems and their history working at Pilgrim Hot Springs. ACEP will work directly with Kawerak to hire a full-service engineering firm whichwill assist with project permitting requirements, reviewing geotechnical site considerations, civil design, all engineering drawings related to the conceptual design, particularly the site layout, and work with ACEP to design a cooling system and injection or discharge strategy for spend fluids consistent with state and federal regulations for wetlands areas. Kawerak has partnered with the Native Village of Mary’s Igloo to apply for the Bureau of Indian Affairs Division of Energy and Mineral Development – Indian Energy and Economic Development division’s Tribal Energy Development Capacity (TEDC) grant program. If the TEDC grant is awarded to Mary’s Igloo, with Kawerak as a sub-grantee, the work to be performed by Kawerak and sub-contractor Deerstone Consulting will contribute as match to the overall effort of the REF project and fit seamlessly into tasks related to the economic feasibility of producing geothermal power on the site. See also: ACEP Scope of Work & Estimate; CRW Engineering Scope of Work & Estimate; Deerstone Consulting Scope of Work & Estimate Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 5 of 35 7/20/2020 2.6 Previous REF Applications for the Project See Section 1.15 of the RFA for the maximum per project cumulative grant award amount Round Submitted Title of application Application #, if known Did you receive a grant? Y/N Amount of REF grant awarded ($) 2 Pilgrim Hot Springs Geothermal Resource Assessment 258 N N/A 3 Pilgrim Hot Springs Geothermal Resource Assessment 466 Y $1,748,343 4 Pilgrim Hot Springs Geothermal Resource Assessment 654 Y $1,330,467 SECTION 3 – Project Management, Development, and Operation 3.1 Schedule and Milestones* Task # Milestones Tasks Start Date End Date Deliverables 1 Phase II: Conceptual Design Project Scoping and Contractor Selection -ACEP & Kawerak develop RFP together -Hire full-service engineering firm July 1 2021 July 30 2021 -Request for Proposals -Engineering firm secured 2 Design Specifications for Geothermal Power Plant and Review of Potential Equipment Vendors -Load forecasting -Design parameters for power plant -Equipment vendor assessment ASAP* Match TBD -Design specifications and vendor report (including results of RFI) for Kawerak 3 Support Site Infrastructure Design -ACEP + Engineering Firm + Kawerak work on site design for geothermal resource -Identify needed permits for future construction of power plant, well water withdrawal and disposal, site development Aug. 1 2021 Oct. 30 2021 -Data package for engineering subcontractor -Written feedback on preliminary design 4 Distribution System Design -DC-based microgrid options, grid architecture Nov. 1 2021 Dec. 31 2021 -Distribution grid layout options Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 6 of 35 7/20/2020 -Engineering firm develop plan for well water disposal and discharge or injection -Conceptual design for site layout. 5 Assessment of Alternatives -Analysis of alternative energy sources at site Jan. 1 2022 Jan. 31 2022 -Analysis of alternatives 6 Economic Feasibility Analysis -Budget estimates for power plant and system -(TEDC) Economic analysis of power plant income potential -Load analysis for prospective business plan July 1 2021 April 30 2022 - Report on economic feasibility of geothermal system and alternatives (ACEP) -Economic Analysis for Energy Development (TEDC) 7 Stakeholder Education -Chena Hot Springs Case Study -UAF ACEP exploration of system design and alternatives Sept. 1 2021 April 30 2022 -Group reports to Unaatuq and Kawerak Board, and AEA on their experience 8 Stakeholder Engagement -Two meetings held on site at Pilgrim Hot Springs for staff, contractors, Unaatuq -Unaatuq Board and all stakeholders are provided with project updates July 1 2021 June 30 2022 -Minutes, reports, photos from meetings on site -Progress updates, newsletters provided to stakeholders in region 9 Ongoing Grant Project Management and Financial Reporting -Stay on task with project milestones and deliverables -Stay on track with project budget and matching funds July 1 2021 June 30 2022 -Project reports, financial reports submitted to AEA -Project updates submitted to Kawerak and Unaatuq stakeholders *See attached Detailed Scope of Work for expanded task descriptions. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 7 of 35 7/20/2020 3.2 Budget 3.2.1 Funding Sources Grant funds requested in this application $368,821.80 Cash match to be provided* $136,892.88 In-kind match to be provided* $0.00 Energy efficiency match provided – N/A $0.00 Total costs for project phase(s) covered in application (sum of above) $505,714.68 Kawerak, Inc. is committed financially to the success of this project, and plans to begin work immediately with Alaska Center for Energy and Power under their current Technical Assistance contract with the Department of Energy-Office of Indian Energy. As described in the attached documentation, Kawerak will utilize up to $25,000 of their technical assistance contract funds with ACEP (secured match) to begin the initial work on design specifications for the geothermal power plant, as well as beginning the review process for potential equipment vendors. This technical assistance work may begin as soon as possible, and continue past the start of this REF project. As additional match, Kawerak, Inc. will contribute a salary/fringe match of up to $22,811.63 for the project manager, and up to $13,800 for project staff support ($36,611.83 total in secured match) which is provided by Kawerak through a co-manager agreement with Unaatuq, LLC. Pending match is listed as the Tribal Energy Development Capacity Grant. If awarded, the Native Village of Mary’s Igloo will work with Kawerak, Inc. as a sub-grantee to contract Deerstone Consulting for economic development analysis work that would contribute greatly to the overall goals of this grant project. If awarded, this funding opportunity would present $75,281.25 in matching funds for Kawerak/Deerstone to contribute to the REF effort. If this TEDC grant is not awarded, it will not impede on the proposed scope of work for the conceptual design of the geothermal power plant for Pilgrim Hot Springs. The TEDC project would only bring added benefit to the project and contribute greatly to the overall results from the REF project. *See attached documentation for proof of matching funds. 3.2.2 Cost Overruns As the project develops, Kawerak will work to ensure that all costs are reasonable, justifiable, and fall within the scope of the project. If there are cost increases due to economic factors or unforeseeable situations, or if there are shortfalls in funding, Kawerak will work with Unaatuq, LLC to identify supplemental funding to complete the project scope. Depending on the gap in funding, there may be capital investments to draw from, secondary grants, small business loans, or private investment opportunities. The property also produces revenue from recreational and tourism activities, and this income may be used to offset project costs in the future. As COVID-19 subsides and the economy and region begin to fall back into a normal routine, we expect the tourism activities to increase on site at Pilgrim Hot Springs, which will allow Kawerak and Unaatuq to collect further revenues and invest in more capital improvements, as well as project activities for this effort. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 8 of 35 7/20/2020 In recent years, there has been considerable interest from private investors regarding energy development at Pilgrim Hot Springs, and we expect this trend to continue as we begin the conceptual design process. Private investors may also be interested in the agricultural, wellness, historical, cultural, and tourism properties of the project site. 3.2.3 Total Project Costs Indicate the anticipated total cost by phase of the project (including all funding sources). Use actual costs for completed phases. Indicate if the costs were actual or estimated. Reconnaissance [Actual/Estimated] $5,500,000.00 (approximate) Feasibility and Conceptual Design [Actual/Estimated] $505,714.68 Final Design and Permitting [Actual/Estimated] $500,000.00 Construction [Actual/Estimated] $2,500,000.00 Total Project Costs (sum of above) Estimated $9,005,720.50 Metering/Tracking Equipment [not included in project cost] Estimated $250,000 3.2.4 Funding Subsequent Phases Subsequent phases of this project, including final design and construction, will be funded by income revenues, capital contributions, as well as a combination of grants, loans, and other opportunities such as: - Federal grants – Department of Energy, Bureau of Indian Affairs - State and Regional grants - Loans – small businesses opportunities - Tax credits – opportunity zone - Carbon credits - Native Organizations, Native Business Development Institute - Private Investment, Donations Additional revenue streams include current & future plans for tourism revenue, small business development opportunities, agricultural activities, concessions, land lease agreements, land use agreements, and more. It is the goal of Unaatuq to develop Pilgrim Hot Springs into a sustainable business that provides direct benefit to the residents of the Bering Strait Region. As we work to develop on-site infrastructure, revenues will increase and there will be greater opportunities for expanded facilities. By completing this conceptual design phase, Kawerak and Unaatuq will be strategically positioned to seek out larger funding opportunities from federal agencies for final design and construction. It is also expected that private investors will be interested in the development of geothermal resources at Pilgrim Hot Springs, and we will continue to look for partners that share our goals of sustainable development, culturally-relevant business ideas, and innovative technologies that address some of the most pressing concerns of our time. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 9 of 35 7/20/2020 3.2.3 Budget Forms Phase 2 — Feasibility and Conceptual Design Milestone or Task Anticipated Completion Date REF Grant Funds Grantee Match Funds Other Match Funds TOTALS 1.Project Scoping and Contractor Selection 7/30/21 $32,334.18 $2,440.77 $0 $34,774.98 2.Design Specifications for Geothermal Power Plant & Review of Potential Equipment Vendors TBD $71,558.29 $2,440.77 $25,000 $98,999.09 3.Support Site Infrastructure Design 10/30/21 $61,464.74 $2,440.77 $0 $63,905.54 4.Distribution System Design 12/31/21 $38,724.74 $2,440.77 $0 $41,165.54 5.Assessment of Alternatives 1/31/22 $25,080.74 $2,440.77 $0 $27,521.54 6.Economic Feasibility Analysis 4/30/22 $52,617.83 $2,440.80 $52,500 $107,558.83 7.Stakeholder Education 4/30/22 $21,760.32 $7,322.33 $0 $29,082.72 8.Stakeholder Engagement 6/30/22 $21,760.32 $7,322.33 $0 $29,082.72 9.Ongoing Grant Project Management and Financial Reporting 6/30/22 $43,520.64 $7,322.33 $22,781.25 $73,624.29 TOTALS $368,821.8 $36,611.63 $100,281.25 $505,714.68 Budget Categories: Direct Labor & Benefits $82,993.80 $22,811.63 $0.00 $105,805.43 Travel & Per Diem $8,555.00 $0.00 $0.00 $8,555.00 Equipment $4,200.00 $0.00 $0.00 $4,200.00 Materials & Supplies $49,320.00 $13,800.00 $0.00 $63,120.00 Contractual Services $223,753.0 $0.00 $100,281.25 $324,034.25 Construction Services $0.00 $0.00 $0.00 $0.00 Other $0.00 $0.00 $0.00 $0.00 TOTALS $368,821.8 $36,611.63 $100,281.25 $505.714.68 Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 10 of 35 7/20/2020 3.2.4 Cost Justification Indicate the source(s) of the cost estimates used for the project budget, including costs for future phases not included in this application. Budget Categories: REF Grant Grantee Match Other Match TOTALS Direct Labor & Benefits $82,993.80 $22,811.63 $0.00 $105,805.43 Travel & Per Diem $8,555.00 $0.00 $0.00 $8,555.00 Equipment $4,200.00 $0.00 $0.00 $4,200.00 Materials & Supplies $49,320.00 $13,800.00 $0.00 $63,120.00 Contractual Services $223,753.0 $0.00 $100,281.25 $324,034.25 Construction Services $0.00 $0.00 $0.00 $0.00 Other $0.00 $0.00 $0.00 $0.00 TOTALS $368,821.8 $36,611.63 $100,281.25 $505.714.68 Direct Labor & Benefits The labor and fringe costs are based on the following: $82,993.80 in direct labor and benefit costs from the Renewable Energy Fund consists of 35% of full-time employee salary for the Pilgrim Hot Springs (PHS) General Manager, on-site project personnel costs for the PHS Caretaker and PHS Laborer, and an in-office Grant Financial Manager for the period of grant performance. The PHS General Manager will commit one-third or more of her time during this project period of July 1, 2021-June 30, 2022 to the geothermal energy project, as project manager. The PHS General Manager has an expected salary rate of $37.55 per hour, at 700 hours (35% FTE) for a total of $26,285. Benefits at Kawerak include Federal Employee Health Benefits and an employer- matched retirement plan. The fringe benefit rate at Kawerak is 35%, and includes the company paid benefits of Medical, AD & D, Basic Life, Dental, LTD, Pension, Pension Fee, STD, Vision, FICA, MEDIA, SUTA:AK. Holidays, personal leave, and subsistence leave are also included in Kawerak employee benefits. The 35% fringe rate is $9,199.75 for the PHS General Manager, for a total salary of $35,484.75. The PHS Caretaker is budgeted at $24.50 per hour, at 120 hours, for a total of $2,940.00. Fringe benefits for the on-site caretaker are seasonal and do not include full-time Kawerak employee benefits. Workers compensation is provided only at a rate of 7%, or $205.80, for a total of $3,145.80. The PHS Laborer is budgeted at $22.50 per hour, at 110 hours, for a total of $2,475.00. Fringe benefits for the on-site laborer are temporary only, and do not include full-time Kawerak employee benefits. Workers compensation is provided only at a rate of 7%, or $173.25, for a total of $2,648.25. The Kawerak Grant Financial Manger salary is budgeted at $51.50 per hour, at 600 hours, for the proceeding matching project period, the full year of grant performance, and the follow-up grant Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 11 of 35 7/20/2020 financial reports associated with this project. The total for this financial manager is $30,900.00, including fringe benefits at 35%, or $10,815.00, for a total of $41,715. $22,811.63 in matching funds from Kawerak, Inc. consists of 450 hours of work by the Project Manager, which will commence ASAP in conjunction with the technical assistance provided as match by the Kawerak-ACEP contract (funded to Kawerak through DOE-OIE Technical Assistance Grant) in regards to task 2: design specifications and review of potential equipment vendors. Salary for 450 hours is $16,897.50 including fringe at $5,914.13 for a total of $22,811.63. The project total for direct labor and benefits is $105,805.43. Travel & Per Diem The travel & per diem costs are based on the following: $6,695.00 in travel and per diem costs from the Renewable Energy Fund consists of the project activities as described in task 7: stakeholder engagement, for an educational visit to Chena Hot Springs in Fairbanks to observe their geothermal power plant system and discuss energy development alternatives at the UAF-ACEP campus. Travel is budgeted as follows: the Project Manager and one other Kawerak staff member will travel to Fairbanks along with three members of the Unaatuq Board of Directors (five travelers total). Airfare is budgeted at $458.00 per person round-trip from OME-FAI, hotel at $109.00 per night for four nights, ground transportation at $20 per person, per day, and per diem at $60 for each travel day and $75 for each working day, per person; for a trip total of $1,399.00 per person x 5 people = $6,695.00 $1,860.00 in additional travel and per diem costs include costs associated with the two on-site visits to Pilgrim Hot Springs by Unaatuq Board Members for stakeholder meetings. The cost of these meetings is budgeted at two rental vehicles at $150 each, seven board members receiving per diem at $60 per day x 2 meetings, and 12 total travel days at $60 each for the PHS General Manager for on-site visits related to this project; for a total of $1,860.00. The project total for travel and per diem is $8,555.00. There are no matching funds provided for travel/per diem. Equipment The equipment costs are based on the following: $4,200.00 in equipment costs from the Renewable Energy Fund consists of computer and related items (portable laptop computer with printer/scanner and accessories for project staff at Kawerak) calculated at $2,100.00 for two computers, for a total of $4,200.00. There are no matching funds provided for equipment. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 12 of 35 7/20/2020 Materials & Supplies The materials and program supply costs are based on the following: $49,320.00 in materials and program supplies from the Renewable Energy Fund consists of the preparation of onsite housing for site mapping and technical visits by two or more ACEP staff members, which includes mobilization and de-mobilization equipment costs for equipment needed to prepare campsites (brush cutter, dozer services) at $7,500.00, gravel purchase and delivery for the sites at $5,500, and the purchase of two portable wall-tent structures at $6,000.00 each, or $12,000.00, for a total cost of $25,000 related to on-site housing for the technical project staff campsite; this also includes meeting supplies (handouts, educational materials, presentation materials, coffee and water) for the stakeholder engagement and education tasks which is budgeted at $2,500 for each meeting, for a total of $5,000; printed publications for sharing phase development progress with board members and stakeholders, as well as shareholders and the general public, which includes the printing of newsletters and informational materials, mailing documents, and printing posters, flyers, and other media, is budgeted at approximately $2,500 for the one-year grant period; advertising costs for this project are based on the expectation of sending out public service announcements in the local newspaper in regards to site-development progress, informational meetings, and any on-site work by project contractors, this is budgeted at ten advertisements total for $450 each, or $4,500; internet services for Pilgrim Hot Springs are included in the program supplies costs for the period of grant performance and will allow the on- site project staff to communicate effectively with off-site project staff, contractors, and other stakeholders, the cost of this is budgeted at $3,060 for equipment, $1,200 for installation costs, and monthly service charges at $255 x 12 months for a total of $7,320 in internet services; in-office accounting materials and supplies related to supporting the project financial manager includes the cost for filing support at $600, printing services at $1200, fax services at $250, auditing services at $2,950 for a total one-year cost of $5,000; altogether totaling $49,320.00. $13,800 in matching funds from Kawerak, Inc. consists of a one-year period of internet, telephone, and office support services to the PHS General Manager and Grant Financial Manager, budgeted at $575.00 per month for 12 months x two people, for a total of $13,800.00. The project total for materials and program supplies is $63,120.00. Contractual Services The contractual services costs are based on the following: $223,753.00 in contractual services from the Renewable Energy Fund consists of technical assistance and engineering services related to the conceptual design and economic analysis of a geothermal energy system on site at Pilgrim Hot Springs. Please see the attached quotes from Alaska Center for Energy and Power as well as CRW Engineering for further cost justification. In the case of matching funds for contractual services for both ACEP (DOE-OIE funding through Kawerak) for $25,000 and TEDC Grant (Deerstone Consulting proposal for TEDC Opportunity with Native Village of Mary’s Igloo and Kawerak, Inc.) for $75,281.25, please see attached description of matching funds. Matching funds for contractual services total $100,281.25. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 13 of 35 7/20/2020 The project total for contractual services is $324,034.25. (Construction/Other – Not Applicable to this project) Note: The estimates mentioned in section 3.2.3 for future project phases (Final Design and Permitting, Construction) are estimates. It will be part of the conceptual design project to provide a detailed cost analysis of the proposed system design as well as construction estimates. These numbers are purely for reference, and do not reflect any concrete estimate of what the final design, permitting and construction phases will cost. 3.3 Project Communications 3.3.1 Project Progress Reporting Kawerak will monitor the progress of the project by following the milestone and task timeline as described in the proposal, and will work to develop detailed quarterly reports to Alaska Energy Authority on the status of each task. The project manager, Amanda Toerdal, will be responsible for tracking all progress of the project activities, including checking in with the contractors (Alaska Center for Energy and Power; Engineering Firm) on the progress of their assigned tasks. The tools and methods to track progress will include: Reporting on Completed Outputs (Deliverables): • Request for Proposals will be drafted by Kawerak and ACEP to hire a full-service engineering firm to complete the project work; engineering firm will be contracted by Kawerak • Design specifications will be delivered by ACEP to Kawerak, Inc. as part of the project scope of work; work may begin before grant award as part of proposed matching funds • Vendor report provided by ACEP to Kawerak detailing various equipment options for geothermal power plant system • Data package will be provided by ACEP to the contracted engineering firm so they may begin their work • Feedback from ACEP will be provided to Kawerak and engineering firm in regards to the preliminary design of the system • Distribution grid layout options will be created by engineering firm, in contact with ACEP, as well as a DC-based microgrid option and grid architecture options • Conceptual design including site layout will be created by ACEP and engineering firm • Analysis of alternative energy systems, including solar and diesel • Economic feasibility analysis for geothermal system and alternative options o Energy development economic analysis – TEDC opportunity match • Quarterly reports to Unaatuq and Kawerak Board of Directors • Reports and minutes from two on-site meetings for project staff, contractors and stakeholders Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 14 of 35 7/20/2020 • Progress reports including newsletters updates provided to stakeholders Measuring Outcomes (Results): • This project will provide a detailed conceptual design and microgrid architecture; including equipment options and economic analysis; to Kawerak, Inc. and Unaatuq, LLC • The project will allow all stakeholders to learn more about the geothermal resource at Pilgrim Hot Springs, as well as other alternative energy options for the site, and provide energy education opportunities through program outreach for residents of the region. • The project will provide the capacity needed for Unaatuq, LLC and Kawerak, Inc to engage in further phase development of the geothermal resource on site at Pilgrim Hot Springs and develop economic opportunities, as well as health, wellness, cultural, and historical opportunities, for the residents of the Bering Strait Region. Documenting Performance Measures Throughout this one-year grant project, July 1, 2021-June 30,3033, the Project Manager will be responsible for tracking, documenting, measuring, and reporting the outputs and outcomes of the project. Information collected will be reported in a timely manner to AEA project manager(s) as outlined in the grant agreement. The overall success of the program will be measured by not only the deliverables (as described in the outputs section above), but also through peer review of the outcomes of project activities during Kawerak Board of Directors and Unaatuq Board of Directors meetings. 3.3.2 Financial Reporting Kawerak utilizes fund-accounting concepts. Each fund is an independent fiscal and accounting entity with a self-balancing set of accounts, recording revenues, expenses, assets, liabilities and fund balances which are segregated for the purpose of carrying on specific programs or attaining certain objectives in accordance with the stated purpose of each fund. The general fund is used to record expenditures that benefit all programs. Kawerak’s indirect costs charged to federal funding opportunities are allocated to program funds pursuant to our negotiated indirect rate. The accrual method of accounting is used by each fund. For purposes of this grant opportunity, the indirect rate has not been applied. Kawerak administers federal, state, and private grants, and compact/contracts that are generally of a cost-reimbursement type that include provisions for advances and billings on a reimbursable system. Kawerak’s cash control system is independently audited annually. The cash control system is administered by the Accounting Office and includes cash receipts, banking activities, electronic cash draw downs, receivable analysis and collections and/or reimbursement of contracts. All cash disbursements from Kawerak are made by check based on requests and approval by program directors. A monthly expense report is generated for all of the individual fund accounts. Department and senior managers use these reports to monitor monthly expenses, year- to-date expenses, and the status of the funds budget. The Environmental Program will operate this project. This program began with one EPA funded staff person at Kawerak in 2010 and grew until it was officially formed as the Environmental Program in 2017. It now has eight staff members and generally operates ten grants totaling Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 15 of 35 7/20/2020 $1.5MIL. Its focuses include: energy planning and technical assistance; providing recycling support to the tribal environmental programs; regional environmental protection of our air, water, and land; pollution advocacy; providing landfill operator technical support; Brownfields cleanup support; emergency preparedness; and co-management of Pilgrim Hot Springs. SECTION 4 – QUALIFICATIONS AND EXPERIENCE 4.1 Project Team See attached PDF file: Project Team Resumes – Not to be Published 4.1.1 Project Manager The Project Manager will be Amanda Toerdal, the Pilgrim Hot Springs General Manager. Ms. Toerdal manages the Pilgrim Hot Springs program activities for Kawerak, Inc. as a co-manager of the property and business. Tasks under that role involve expanding energy development opportunities at Pilgrim Hot Springs, as well as business development, agricultural endeavors, economic development, fundraising, historical research, personnel management, and providing reports to the Unaatuq and Kawerak Board of Directors on a consistent basis. Ms. Toerdal has also managed other activities for a variety of federal, state, and regional grant programs under Kawerak, Inc. in her previous role as Energy Development Specialist. Her educational background centers on Sustainable Energy, Communications and Sociology, and her professional experience has involved marketing, media development, outreach programs, and journalism. Publications include quarterly newsletters for the Kawerak Energy Program, as well as various regional news stories published in her previous work as a newspaper report. Her experience with project management and communications will play a vital role in carrying out the tasks of this project. 4.1.2 Project Accountant Donna Ray is Kawerak’s Chief Financial Officer and will manage the financial reporting for Kawerak, Inc under this project. Donna oversees a crew of nine financial team members that manages Kawerak’s annual budget of $38.8 million. Donna is responsible for annual financial reporting, audit activities and cash flow management across the corporation. Dani Smithhisler is a Revenue Accountant at Kawerak, Inc and will submit financial reports in coordination with the Chief Financial Officer and Kawerak project staff. The Project Manager will provide financial information to Ms. Smithhisler for reporting requirements with AEA. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 16 of 35 7/20/2020 4.1.3 Expertise and Resources Alaska Center for Energy and Power The Alaska Center for Energy and Power (ACEP) will be a subcontractor for this project and responsible for the tasks described in the scope of work. ACEP is ideally suited to these tasks due to their expertise in power systems, and their previous role in leading geothermal exploration efforts at Pilgrim Hot Springs between 2010 and 2014 including PS 13-1, the well that will be utilized to provide fluid for the proposed power plant. Gwen Holdmann will serve as the PI and project manager, and will be responsible for communicating with Kawerak, the engineering contractor, and leading the development of specifications, RFI, and design for the geothermal power plant. Gwen was the lead for both the prior geothermal exploration at Pilgrim Hot Springs and the development of the geothermal power plant at Chena Hot Springs. It is expected that a power plant installed at Pilgrim Hot Springs would be based on an Organic Rankine Cycle (ORC) system or other binary technology, similar to the system installed at Chena Hot Springs. Chena Hot Springs has been operating a small geothermal power plant ranging in output from approximately 200 to 400 kWe (net), using produced fluid at 74°C (165 °F). In addition to Gwen Holdmann, the ACEP team will include the following members: Chris Pike will be responsible for data management related to site layout and PS 13-1 characteristics as well as assessment of alternative resources. Chris was the project manager for the Pilgrim Hot Springs confirmation well drilling program and is knowledgeable about each of the drill holes on site. Jeremy Vandemeer will support the conceptual design for the electric layout for the site, as well as specifications related to the power plant and/or ancillary support equipment (energy storage, etc.). Jeremy is an electric engineer who has previously modeled integration of a geothermal power plant at Pilgrim Hot Springs into the Nome grid. Rob Bensin will support planning for the electrical distribution system. He is intimately familiar with the site through prior employment with Bering Straits Native Corporation and has previously led the development of a small seasonal organic farm at the site. Rob is a licensed Electrician and Electrical Administrator in the State of Alaska. A graduate student will also be hired to support the economic analysis of various design alternatives to support engineering and site planning decisions. Engineering Firm The engineering firm has not been officially selected, and the contracting process will become part of the project tasks. CRW Engineering has provided a scope proposal and cost estimate for the work, which is included with this application. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 17 of 35 7/20/2020 Deerstone Consulting, LLC. As part of the Tribal Energy Development Capacity grant, if awarded, as a joint venture between Native Village of Mary’s Igloo and Kawerak, Inc., for the benefit of Unaatuq, LLC., Deerstone Consulting, LLC of Anchorage, Alaska is planned to be hired to complete a feasibility study, economic analysis, and related tasks to develop the energy capacity of Unaatuq, LLC and their stakeholders. If awarded, this grant project’s goals will align nicely with the goals of the REF proposal, and we intend to include that grant as a source of match for this opportunity. Deerstone Consulting has been chosen because of their longstanding working relationship with Kawerak and the tribes of the Bering Strait Region. Since 2018, Dr. Brian Hirsch has provided technical assistance to the Kawerak Energy Program to develop energy projects and assist with energy planning efforts for various projects in multiple Kawerak communities. With the TEDC grant project, the Native Village of Mary’s Igloo, along with Kawerak, Inc., hopes to increase the business capacity for Unaatuq, LLC to manage energy resources at Pilgrim Hot Springs. Capacity is needed to further develop business planning activities, a utility structure, and regulations for selling power at the future geothermal power plant. The Deerstone team for purposes of this project will include Dr. Brian Hirsch, Tashina Duttle, and Alan Mitchell. Dr. Brian Hirsch is the President and Co-Founder of DeerStone Consulting LLC, a renewable energy consulting firm focused on microgrid, utility, and community development in remote locations. Kawerak will contract DeerStone to complete the project activities. Dr. Hirsch will be the main contact for DeerStone Consulting and manage contractor activities as described in the scope of work. He has been involved in diverse energy initiatives throughout the Kawerak/Bering Strait region as well as other parts of Alaska and elsewhere, including with development of intertribal energy organizations and development of renewable energy resources for community and economic development. Tashina Duttle is the owner of Savak Consulting, and is part of the DeerStone Consulting team. Ms. Duttle will work with Kawerak, Inc. and Mary’s Igloo to complete the project deliverables and provide support to project staff as part of the TEDC project, directly related to energy capacity building and the feasibility study for energy business structure development. As well, Ms. Duttle will lead the community engagement component and participate in the strategic planning session as described in the proposal. She has expertise in community and infrastructure development working in remote communities all across Alaska through her current consulting work and in her previous positions as Program Manager for Alaska Native Tribal Health Consortium’s Rural Energy Initiative and as Project Coordinator for the Cold Climate Housing Research Center. Alan Mitchell is the owner of Analysis North, and is part of the DeerStone Consulting team. Mr. Mitchell will work with Kawerak, Inc. and Mary’s Igloo to complete the economic analysis portion of the scope of work for the TEDC Grant. Specifically, he will collect data and perform analysis tailored to the individual development scenarios identified in the Strategic Planning Session to help project stakeholders make informed decisions on the challenges and opportunities associated with each scenario. His analysis will contribute to the overall Feasibility Study and each development pathway identified. Mr. Mitchell has been performing energy and economic analysis for over 30 years and has contributed to past Kawerak and DeerStone projects in the region, including Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 18 of 35 7/20/2020 conducting a techno-economic evaluation of converting excess wind-to-heat for Nome Joint Utilities and the Nome School District. He is the author of AKWarm, the home and commercial building energy efficiency rating software used by the state of Alaska to conduct certified energy audits and has been involved in numerous aspects of energy technology, monitoring, and evaluation initiatives throughout Alaska and elsewhere. 4.2 Local Workforce The project will be run by Kawerak staff, located in Nome, which is the closest hub city to the Pilgrim Hot Springs site. Personnel costs in the budget for this project include the Pilgrim Hot Springs General Manager, Caretaker, Laborer, and Financial Manager. All staff are local and will be trained on the project activities of this grant program. The project will allow Kawerak staff, include the entire Environmental Program, the chance to expand their knowledge of the geothermal resource, and other energy resources, on site at Pilgrim Hot Springs. Kawerak has plans to reach out to the Nome Public Schools District, as well as the University of Alaska Fairbanks’ Northwest Campus in Nome, to engage with Unaatuq on energy development projects, agricultural programs, and other educational opportunities associated with Pilgrim Hot Springs. As the site and business continue to develop, there will be expanded employment opportunities and the chance to teach more local and regional residents about the resources available at the site. As Kawerak continues into the next phases of this project, and geothermal power is produced and more infrastructure is added at Pilgrim Hot Springs, Unaatuq plans to host various renewable energy events and educational forums for the region, as well as expand staff on site working in the renewable energy field. Many opportunities for seasonal tourism employment (i.e. college students looking for summer work at the site), as well as agriculture work (summer farm employees) will also be created as part of this effort. SECTION 5 – TECHNICAL FEASIBILITY 5.1 Resource Availability 5.1.1 Assessment of Proposed Energy Resource The proposed resource is geothermal fluid produced from an existing geothermal well that was drilled in 2014. This 8-in production well, PS 13-1, was completed to a depth of 314 m. Natural artesian flow rates from this well are 60 gpm, while airlift-assisted flow testing of this well conducted by ACEP in September 2014 demonstrated that the well is capable of producing 300 gpm at temperatures ranging from 78.25 °C (172.85 °F) to 79.3 °C (174.74 °F). The minimal pressure changes that were measured at that time, combined with an estimated natural state heat flow from the geothermal system of approximately 20 MWth based on thermal data collected from ground-based and aerial investigations of the site, led researchers to conclude Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 19 of 35 7/20/2020 that the well has the ability to sustainably provide thermal fluid for on-site power generation and district heating applications. A geothermal resource is capable of providing baseload power continually, as it is not affected by short-term environmental fluctuations. However, it is important to develop a careful long-term reservoir monitor plan including maintaining adequate reservoir pressure. 5.1.2 Alternatives to Proposed Energy Resource A geothermal power plant is an ideal resource when it is available because it is capable of providing power 24/7. The primary constraint is usually associated with cost, particularly in the resource evaluation and drilling phases. In the case of the Pilgrim Hot Springs geothermal site, a production well has already been completed and tested using a combination of federal and private funds. This significantly reduces risk associated with the project. Prior testing has shown that this well should be easily capable of sustaining a 200 kW geothermal project. The resource is expected to be capable of sustaining up to 5 MW, however this would require drilling a larger and deeper production well. Another possible issue with geothermal is the disposal of spent fluids. During well testing, ACEP used a flow through hot springs pool and surface discharge but for long-term operation reinjection of at least a portion of the spent fluids is desired to protect the local environment and to maintain adequate reservoir pressures. The site owners are committed to ensuring long-term sustainable utilization of the site, and as such a significant part of the conceptual design will include development of a plan for the hot water rejected from the plant. There are also other resources that should be considered to meet the near-term goals of Kawerak and Unaatuq, most notably solar energy. As a result, ACEP is planning to conduct a feasibility study (including economic evaluation) of a solar project either in addition to geothermal, or in place of a geothermal power plant. Solar energy aligns well with an initial summer-only operation as proposed by Kawerak. Surveys of Alaska installations show costs ranging from $2.20 to $5.00/Watt for remote installations larger than ~45 kW. Capacity factors range from 8%-16%. For the Nome area, according to NREL's PVWatts tool, solar irradiance levels are on the order of 5-6 kWh/m2/day in the summer months, and a ~300 kW array is predicted to yield a little over 300,000 kWh total annual energy production. Alaska’s cold temperatures increase system voltage, reduce electrical resistance, and yield higher-than-rated outputs associated with reflected light and albedo effects. These factors, combined with declining module prices, are making solar PV technology more economical. Solar PV arrays have been installed in all areas of the state from the southwest to the Arctic, and low sun angles and long daylight hours represent opportunities to mount panels vertically on walls as well as on the east and west sides of buildings. 5.1.3 Permits There will be no permits associated with the conceptual design phase of the project, with the exception of site access permits required by the team. The following permits may be applicable to the future construction of a geothermal power plant. Kawerak is planning to retain a full-service engineering firm to support permit planning. There are no specific concerns related to the ability to acquire these permits. The process is expected to take one year once a conceptual design is completed. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 20 of 35 7/20/2020 Site Access Permitting - Kawerak/Unaatuq LLC Drilling Permit - Alaska Oil and Gas Conservation Commission (AOGCC). This would only be required if an injection well is required. Water Use Permit – DNR - will be required if cooling fluid is used from the Pilgrim River. Waste Management Permit (liquid) – DEC - will be required for discharge of thermal fluids, either at the surface or subsurface. Alaska Fish and Game (ADF&G) Permit - will be required if there is surface discharge of fluids. There has already been an assessment completed by ADF&G that there are no anadromous fish in the vicinity of the springs that could be harmed by modest fluid discharge mimicking the natural output of the system. National Environmental Policy Act (NEPA) Bureau of Land Management (BLM) - Required for road access and use of nearby gravel pit for materials (if needed) State Historic Preservation Office (SHPO) - Pilgrim Hot Springs is on the list of state and federally recognized historic sites. 5.2 Project Site The project site is owned by Unaatuq, LLC, of which Kawerak, Inc. is a majority owner and co- manager. The proposed energy system would be located on Unaatuq property and benefit current and future infrastructure for Pilgrim Hot Springs. The site owners approve of the proposed project as a group and have complete site control. Access to the property is by a seven-mile access road that crosses Bering Straits Native Corporation, Bureau of Land Management, and Mary’s Igloo Native Corporation lands. The access road is maintained by Unaatuq, LLC through an access agreement with Mary’s Igloo Native Corporation and Bering Straits Native Corporation landowners. The access agreement is renewed every three-five years. There is potential to make the access road a public easement, which will be explored during this project. The site may also be accessed from the Pilgrim River, by obtaining a permit from Mary’s Igloo Native Corporation. The property may be accessed by helicopter year-round, and snow machine or dog sled in the winter. There is also a 1000 ft. runway on the entrance road that is currently in disrepair, but could be made usable again. 5.3 Project Technical & Environmental Risk 5.3.1 Technical Risk There are no significant technical risks associated with conceptual design. More generally, the primary technical risk associated with developing a geothermal power plant is in siting and completing the wells. This is exacerbated by drilling in a remote location such as Pilgrim Hot Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 21 of 35 7/20/2020 Springs. Fortunately, the production well has already been completed so any future drilling would be associated with a possible injection well. Siting and designing such a well is a primary objective of this project. In addition to the production well, there are a number of monitoring wells available to assess response of the resource to various production scenarios. There may also be some opportunities to inject fluid at shallow depth and monitor response of the system. An additional challenge may be in finding a suitable vendor for a product that has a track record and, ideally, grid-forming capabilities. Small ORCs are generally a niche product though there are several vendors that seem to be well-established. The equipment with the most experience in Alaska is Electratherm, which was recently purchased by Bitzer Group. Their products including the 4500B (75kWe) or 6500B (125 kWe) ORC may be well suited to this project. However, there are also a number of other manufacturers and we plan to conduct a thorough assessment of the options available including risk associated with any particular equipment. 5.3.2 Environmental Risk The proposed project area is surrounded by wetlands. The pathways depicted in the figures below follow the pathways of the natural flow of the geothermal system once it discharges at the surface, and was established using conductivity measurements (looking at salinity) of surface waters in the vicinity of the project. In 2014, ACEP worked with DEC to understand possible impacts to surrounding lands and fish. The two figures included in this section show the general flow of fluids from the hot springs, and any discharge from the well through the “infinity pool”, which is a flow- through hot springs pool designed in accordance with the Alaska flow-through hot springs statute (Sec. 44.46.028), and in accordance with established health and safety features. Care will need to be taken to protect nearby lands, and working with permitting agencies building on the positive relationship established during the 2014 drilling season are a major focus of this proposed effort. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 22 of 35 7/20/2020 Figure One: Figure Two: E y ALASKA ENERGY AUTHORITY IJ naatuq boundary Option Nl Ro:ul [!] r'roduc.t iQII "t'JI W•rtr now dil'trliooo An.'ali of shlgrutnt water UIUt~n't)'td area Sitt' Ouollin~ IJUS)ibility Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 23 of 35 7/20/2020 Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 24 of 35 7/20/2020 5.4 Technical Feasibility of Proposed Energy System 5.4.1 Basic Operation of Existing Energy System This site is unusual in that there is no existing power infrastructure. The Pilgrim Hot Springs geothermal site is currently considered a greenfield site, without any sort of existing permanent generation or distribution infrastructure. Site power, when needed, is currently provided by temporary (portable) generators. In addition to power plant design, 5.4.2.2 Existing Distribution System There is no existing distribution system on site. The distribution system will be designed as part of this project. The greenfield nature of this site provides a unique opportunity to consider innovative approaches without the constraint of existing legacy systems. 5.4.3 Future Trends The life of the project is projected at approximately 20 years for the geothermal system. Currently, energy demands at the project site are powered only by temporary energy systems (diesel generator-batteries-small solar set-ups), and consist of a potable water well with an electric in-pipe pump, bathing pool with digital temperature zone-valve control, caretaker lodging including appliances, lights, water heating, water pumping and space heating, workshop facilities including lights and power tools, and storage facilities. Within the next one-three years, loads are projected to expand to include aeration pumps for the hot springs bathing pools, lighting near pools, and lighting and electrical plug-ins in the public changing areas. We also plan to add lights and water stations to public outhouse facilities. Next year, Unaatuq plans to install satellite internet on-site for safety and security, and will install wi-fi routers and security cameras throughout the property. Guest lodging is already being added and will include three or more full-service cabins with kitchens, space heating, private hot tubs, and electricity. Tent campsites are being developed with small power stations available for guest use. A public shower facility will be added near the main bathing pool and campsite area, which will need water heating, pumping, and lighting. Near the runway/entrance road area, we will look at Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 25 of 35 7/20/2020 adding lighting, expanding water pumping and piping for potable water, and clearing drive-in campsites with power hook-ups for recreational vehicles. Renovation and historical restoration efforts will also take place, which will include restoring and providing power, water, and space heating amenities to the historical church mission complex. Buildings to be electrified and heated include the church (possible café, gift shop, museum), dormitory (possible lodging), nuns’ quarters (offices and lodging for staff), machine shop (office or lodging), storage shed (storage or office space), and possibly other on-site buildings. The church complex area will also need trail lighting, potable water stations, outhouse facilities (sanitation & waste water), and electric fencing to keep wildlife out. We also plan to add a marked and lighted pathway to the cemetery, which includes a public- easement for anyone wishing to visit family or pay their respects to the many laid to rest at Pilgrim Hot Springs. There are two mass graves from the 1918-1919 Spanish Flu epidemic victims in the cemetery. Unaatuq plans to pursue funding to erect a memorial in their honor. Within three to five years, Unaatuq hopes to expand agricultural efforts on the property. Power, water and space heating will be needed in the gardening complex area. This will include a water & irrigation system, area & flood lighting, power stations for plug-in tools, security cameras, and electric bear & moose fences. We will also have a greenhouse, vegetable preparation areas, possible canning facilities, and packing/transport stations that will need power and water. We will also prepare lodging facilities for seasonal and full-time garden staff. In three to ten years, Pilgrim Hot Springs will have grown into a self-sustaining business that benefits residents of the Bering Strait Region. Not only as a recreational and wellness destination, Pilgrim Hot Springs will offer small business opportunities such as concessions, artist opportunities for selling handcrafted items during festivals (such as a revival of the historic Reindeer Fair, which took place at Pilgrim Hot Springs in 1915 and 1916) and in the museum/gift shop, lodging opportunities for entrepreneurs, and tourist opportunities for local guides to expand their services. Agricultural efforts will benefit the regions’ villages by supplying staples such as potatoes, turnips and onions, increasing local food security. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 26 of 35 7/20/2020 In ten to fifteen years, Unaatuq hopes to build a large guest lodge onsite to accommodate the tourist and visitor demand of the property. The lodge design and capacity will be based on guest traffic and built for the climate, and is expected to include hotel rooms and bathrooms for one- hundred guests, kitchen, a small restaurant and bar, gift shop, common area, and event/conference space. A hot springs spa and wellness center may also be a viable addition to this facility. In years fifteen to twenty, it is expected that the load will increase beyond the capacity of the initially installed system, and a larger energy production system will be added to accommodate demand. With energy production expansion, Unaatuq hopes to introduce new economic development opportunities to the property such as technology testing grounds, electric vehicle charging stations, and even the possibility for a data center on site. By using geothermal energy as the base load, and integrating other renewable resources such as wind, solar, and hydropower, Pilgrim Hot Springs will stand out as one of few tourist destinations in the nation completely powered by locally-sourced, renewable energy; benefitting the Indigenous communities of the Bering Strait Region. 5.4.4 Proposed System Design We anticipate the geothermal power plant will utilize up to 200 gpm and be capable of producing up to 200 kWe (net) from 79.3 °C (174.74 °F). This was determined based on the production capacity of the existing well, combined with anticipated site needs over the next 5 years. Additional criteria include: - Consider future expansion/growth - The system will include both heat and power for the site - If possible, a grid forming (synchronous) machine is preferred - The system will either be air or water cooled TBD - A non-organic working fluid is preferred (R134a or R245fa have been previously used for ORCs in Alaska) Anticipated Water Design Points (200 kWe): Heat source: Tin = 174 °F Tout = 135 °F Flow rate: ~200 gpm Heat sink: Tin = 40 °F Tout = 49 °F Flow rate: ~1200 gpm Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 27 of 35 7/20/2020 Anticipated Refrigerant Design Points Mass flow rate: 26.8 lbm/s Evaporator/turbine inlet pressure: 232 psia Condenser/turbine exit pressure: 63.6 psia Turbine gross power: 250 kW Pump power: 40 kW System output power (net): 210 kW Thermal efficiency: 8.2 % Note on Civil Infrastructure, Road Access: The Pilgrim Hot Springs access road is a seven-mile road connecting the main Nome-Taylor Highway, also known as the Kougarok Road, to Unaatuq property. The Pilgrim Hot Springs access road crosses Bering Straits Native Corporation (BSNC), Bureau of Land Management, and Mary’s Igloo Native Corporation (MINC) lands. The majority of the seven-mile road crosses MINC land, and there is an access agreement in place between Unaatuq, LLC, MINC and BSNC. As part of the access agreement, regular road maintenance takes place on the access road when necessary, and these improvements are arranged by Unaatuq, LLC and carried out by the managing owners. In July 2020, road improvements took place on the access road. Large sink holes were filled and gravel was added where necessary. Brush was cleared from the sides of the road. Road maintenance will take place again in 2021, and annual repairs are expected to be necessary for the life of the access road. It is expected that additional gravel will need to be added in low areas of the road that are susceptible to sinking, as part of the geothermal power plant project. With added traffic, especially from heavy equipment that may be necessary for well testing or feasibility efforts, we may need to widen certain parts of the road or fill new holes caused by permafrost thaw. On Unaatuq property, the gravel road leading to the area with the geothermal production well may also need to be stabilized and widened. Brush will need to be cleared from these areas as well. As development continues on the site, Unaatuq and Kawerak will work together to find feasible, economic solutions for long-term access road and on-site road improvements. 5.4.4.1 Proposed Power Generation Units As part of this conceptual design project, various Organic Rankine Cycle generation units will be studied for their performance in cold climates, as well as how well they suit the goals of this project. This project deals with the conceptual design only of the system, and therefore no power generation units have been selected. Sections 5.4.4.1-5.5.2 are not applicable to this project. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 28 of 35 7/20/2020 SECTION 6 – ECONOMIC FEASIBILITY AND BENEFITS 6.1 Economic Feasibility 6.1.1 Economic Benefit As part of this project, the team will assess the economic feasibility of the proposed system. The chart provided in this section is not applicable to our project phase. 6.1.2 Economic Benefit The direct economic benefits to the community, and Unaatuq, LLC, will be examined as part of the conceptual design and feasibility phase. We have not used the provided economic model for this section. Notes: This project will allow Unaatuq, LLC to create sustainable, renewable, affordable power on site at Pilgrim Hot Springs. With this abundant resource, Unaatuq will work towards their vision to create a sustainable business that provides for the people of the region. By providing a seasonal destination (and eventually year-round destination) for wellness and recreational activities just 60 road miles north of Nome, Unaatuq is providing a close-to-home opportunity for families, friends, and guests to explore the region and to “vacation” without spending too much money. With a wellness and recreational destination in their own backyards, regional residents will benefit from having a tourist attraction that is only a drive away. Agricultural projects on the site are planning in the upcoming years, and it is one of Unaatuq’s goals to bring seasonal (and eventually year-round) growing projects to Pilgrim hot Springs. The property has been home to successful gardens throughout the past century, and the warm fertile soils make for excellent farming opportunities. It is our hope, that with careful planning and great logistical plan, we can eventually produce staple produce, such as potatoes, turnips, and onions, to the residents of the Bering Strait Region. This will give families a chance to purchase regionally- grown, fresh produce, at a fair price. As other endeavors expand at the property and the geothermal power is harnessed for energy, we hope to also provide valuable information to other communities that also have a geothermal resource. This will provide an economic benefit to all Alaskans, by sharing valuable scientific information that can help address the greatest energy challenges of this generation. 6.1.3 Economic Risks All energy development projects have risk, and Unaatuq is no stranger to this scenario. The millions of dollars spent in reconnaissance work by various organizations and agencies between 2010-2014 culminated in the conclusion that it just wasn’t quite the right time, nor the most ideal resource, to utilize the resource at Pilgrim Hot Springs and bring geothermal power back to Nome. While it was a dream solution in times of high energy costs, the feasibility of a 60-mile transmission Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 29 of 35 7/20/2020 line is a hard sell. That is why Unaatuq is focusing now on keeping power at the site, and encouraging people to come to us. Hundreds of visitors came to Pilgrim Hot Springs this summer, hundreds last summer, and thousands in summers before that… We expect this traffic to only continue to grow as the COVID- 19 Pandemic subsides and tourists and guests begin to grace our region again. Due to our work on site, safety, and access improvements on the property, guests are more easily able to visit the property and enjoy the geothermal resource. Unaatuq understands the risks of energy development – the cost could be too great, the operations and maintenance could be difficult and require expensive overhaul and specialized labor, there could be a decreased interest in visiting the region, tourism revenue could decline, increased snow melt and beaver activity could flood the property and destroy agricultural lands or infrastructure, a large earthquake could shatter what little we have left of the historical buildings… We are prepared to take the risk, and to utilize this unique, beautiful place for the fantastic natural resource that it provides. 6.2 Other Public Benefit This project is unique in its entirety. Pilgrim Hot Springs is a special place for many people of the Bering Strait Region, across the state of Alaska, and throughout the Nation and world. Not only is the site home to a renewable energy resource (geothermal energy), but it is also a site of subsistence activities, wellness and healing, agricultural endeavors, and has great historical significance. The “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” project would encourage continued preservation of the property and its infrastructure, and encourage development activities for the benefit of the region. By providing lodging areas for contractors and staff to use for site mapping, Kawerak, Inc. and Unaatuq LLC will be able to continue to use structures for other purposes, such as youth retreats, wellness retreats, organizational meetings, etc. There will be a direct long-term increase in jobs on site at Pilgrim Hot Springs, as the design and eventual installation of a geothermal power plan will create staffing needs and contract work for local employees. Food security is of great concern in the region, and Pilgrim Hot Springs has ideal land for agricultural development. It is a goal of Unaatuq, LLC and Kawerak, Inc. to develop exciting agricultural projects at Pilgrim Hot Springs, using geothermal energy and the naturally fertile soil of the landscape to produce food staples for the region, such as potatoes, turnips and onions. By supplying these basic food staples to our regions’ villages, we can cut down delivery times, shorten the supply chain, and produce an item that will have immediate, positive benefits for tribal members and residents of the region. This project is of great interest to not only this region, but other parts of Alaska and the world. Low temperature geothermal power plants are unique, and there are very few in the world. This Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 30 of 35 7/20/2020 conceptual design project, and our future plans for final design and construction, will provide valuable research information to other geothermal sites around the world and other possible developers. We are certain that this project will draw interest worldwide, as it is scientifically unique and aesthetically beautiful. The development of geothermal power production at Pilgrim Hot Springs will promote and sustain long-term commercial economic development for the Bering Strait Region. This small geothermal system will be a great way to test the overall resource and make way for future develop at or near the site. The native corporations of Mary’s Igloo and Bering Straits may find pathways for development of the geothermal resource that extends onto their land, outside of Unaatuq property. This will give way to further develop on Alaska Native lands and future economic development opportunities for the region. SECTION 7 – SUSTAINABILITY The project is for conceptual design only. As such, sections 7.1.1-7.1.2.2 are not applicable to this project proposal. Note on economic sustainability of the project: As proposed in the matching funds section, Unaatuq, LLC and Kawerak, Inc. have partnered with the Native Village of Mary’s Igloo to apply for a BIA-IEED grant for Tribal Energy Development Capacity (TEDC). If awarded, a portion of that grant would act as match for this project. The project activities contained within the TEDC proposal are in line with the goals of this project. The TEDC project will focus on studying and proving the financial sustainability of energy development for Unaatuq, LLC, the economic feasibility of producing and potentially selling geothermal power on site, and benefits for long-term success. This work will be carried out under section six of the proposed milestones chart. See attached: TEDC Scope of Work SECTION 8 – PROJECT READINESS 8.1 Project Preparation Since 2010, Unaatuq has been preparing for development of the geothermal resource on site at Pilgrim Hot Springs. The reconnaissance and feasibility phases have successfully been completed with the assistance of Alaska Center for Energy and Power during their 2010-2014 exploratory project. Please see the attached reports detailing the work of these initial phases. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 31 of 35 7/20/2020 This project proposes a conceptual design phase, spearheaded by Kawerak, Inc., as the new co- managing owner of the property. At this phase in the project, there are no permits necessary other than the standard land access permits for visitors and investigators on Unaatuq property. If access to surrounding native corporation lands belonging to Mary’s Igloo Native Corporation and/or Bering Straits Native Corporation is required during site mapping and site visits, permits will be acquired from the appropriate corporation offices. The land access to Unaatuq, LLC property is currently secured under a land-use permit between Unaatuq, LLC, Mary’s Igloo Native Corporation, and Bering Straits Native Corporation. Access to the site is by a seven-mile road. More information on site access can be found in section 5.2. For development of conceptual design, minimal equipment and materials will be necessary to complete the tasks as outlined in the scope of work. Heavy equipment for drilling test wells, monitoring wells, and the production well was used during the initial phases of geothermal exploration. These same monitoring wells and production well will be assessed again to confirm feasibility and to provide data for the conceptual design. The wells are in the same condition they were in back in 2014 when ACEP finished their exploratory project. Kawerak is ready and able to handle procurement of any other materials or equipment necessary to the conceptual design phase of this project. Specifically, as described in the budget and budget justification sections, materials and equipment will focus on staff equipment for site monitoring (computers), as well as site preparation for the on-site visits (tent and campsite preparations, meeting preparations) and correspondence with all stakeholders, as well as the general public. Note on Unaatuq’s Relationship with the Alaska Oil and Gas Conservation Commission: Unaatuq is a consortium of seven organizations in the Bering Straits region formed to own and manage Pilgrim Hot Springs. Bering Straits Native Corporation and Kawerak, Inc. manage Unaatuq on behalf of its members. Beginning in 2012, Unaatuq and the University of Alaska— Fairbanks’s Alaska Center for Energy and Power (“ACEP”) engaged in a multi-year exploration program at Pilgrim Hot Springs with the ultimate goal of developing geothermal resources, including generating renewable geothermal electricity for the community of Nome. Although ACEP’s involvement in the project ended in 2014, Unaatuq remains interested in options for future development of the geothermal resources. In 2014, Unaatuq took over responsibility, as the designated Operator, for four geothermal wells drilled by ACEP on Unaatuq lands near Pilgrim Hot Springs. Three of the wells (referred to as PS- 12-1, PS-12-2, and PS-12-3) were drilled in 2012 and consist of solid casings incapable of allowing water flow. In 2013, the Commission (AOGCC) approved ACEP’s request to classify those three wells as in suspended status. The fourth well (referred to as PS-13-1) was drilled in 2013 and completed in 2014. PS-13-1 was classified as an exploratory well capable of producing geothermal resources. As part of the transfer in responsibility, Unaatuq assumed ACEP’s blanket surety bond in the amount of $200,000 for the four wells, which ACEP had originally filed with the Commission Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 32 of 35 7/20/2020 (AOGCC) in July 2012. On July 24, 2015, the Commission approved Unaatuq’s request to become the designated operator. The Commission subsequently granted Unaatuq’s requests for sundry approvals reclassifying well PS-13-1 from exploratory to production status, and maintaining wells PS-12-1, PS-12-2, and PS-12-3 in suspended status. SECTION 9 – LOCAL SUPPORT AND OPPOSITION See attached: Letters of Support for Kawerak-Pilgrim Hot Springs-REF Application There is strong local and regional support for this project. SECTION 10 – COMPLIANCE WITH OTHER AWARDS This would be the first grant Kawerak has received from Alaska Energy Authority, however Kawerak has worked with various regional, state, and federal agencies on grant projects throughout the years. Kawerak administers approximately $36 million in state, federal and other contracts through its programs. Each program falls under four primary divisions: Education, Employment & Supportive Services, Community Services, Cultural and Regional Development, and Natural Resources. The Administrations Division supports these four divisions with executive management, facilities management, human resources, legal service, information systems, and financial services. This project will be operated under the Natural Resources division which oversees the Environmental Program, Eskimo Walrus Commission, Land Management Services, Marine Program, Reindeer Herders Association, Social Sciences, and Subsistence Resources Program. The Environmental Program will manage this project and also oversees the co-management of Kawerak activities for Unaatuq, LLC, which owns Pilgrim Hot Springs. The Environmental Program began with one EPA funded staff person at Kawerak in 2010 and grew until it was officially formed as the Environmental Program in 2017. It now has eight staff members and generally operates ten grants totaling $1.5MIL. Its focuses include: energy planning, providing recycling support to the tribal environmental programs, regional environmental protection of our air, water, and land, pollution advocacy, providing landfill operator technical support, Brownfields cleanup support, emergency preparedness, and co-management of Pilgrim Hot Springs. The Kawerak Environmental Program has been able to meet grant all requirements for its various project activities over the past decade. Anahma Shannon is the Program Director and has been with the program since its inception. She is very familiar with the region and its challenges and has built good working relationship with multiple agencies and all our tribes. Ms. Shannon works diligently to adhere to all project and reporting deadlines under grant activities, answers information requests in a timely and professional manner, and works closely with Kawerak Accounting staff to ensure all financial responsibilities are met. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 33 of 35 7/20/2020 SECTION 11 – LIST OF SUPPORTING DOCUMENTATION FOR PRIOR PHASES Attached: Final Report, Pilgrim Hot Springs Geothermal Exploration (ACEP, 2010-2014) See also: http://acep.uaf.edu/projects-(collection)/pilgrim-hot-springs-geothermal-assessment.aspx SECTION 12 – LIST OF ADDITIONAL DOCUMENTATION SUBMITTED FOR CONSIDERATION In the space below, please provide a list of additional information submitted for consideration. Resumes of Key Personnel & Project Team Scope of Work & Quotes from ACEP, CRW Scope of Work from TEDC, Deerstone Project Letters of Support for Project Proposal Map of Pilgrim Hot Springs Map of Kawerak Region Kawerak Organizational Chart Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 34 of 35 7/20/2020 SECTION 13 – AUTHORIZED SIGNERS FORM Community/Grantee Name: Kawerak, Inc. Regular Election is held: Date: Authorized Grant Signer(s): Printed Name Title Term Signature Melanie Bahnke President/CEO Mary David Executive Vice President Donna Ray Chief Financial Officer I authorize the above person(s) to sign Grant Documents: (Must be authorized by the highest ranking organization/community/municipal official) Printed Name Title Term Signature Melanie Bahnke President/CEO Grantee Contact Information: Mailing Address: PO Box 948 Nome, AK 99762 Phone Number: 907-443-5231 Fax Number: 907-443-4452 Email Address: pilgrim@kawerak.org Federal Tax ID #: 92-0047009 Please submit an updated form whenever there is a change to the above information. Renewable Energy Fund Round 13 Grant Application – Standard Form “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. AEA 21010 Page 35 of 35 7/20/2020 SECTION 14 – ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION: A. Contact information and resumes of Applicant’s Project Manager, Project Accountant(s), key staff, partners, consultants, and suppliers per application form Section 3.1, 3.4 and 3.6. Applicants are asked to provide resumes submitted with applications in separate electronic documents if the individuals do not want their resumes posted to the project web site. B. Letters or resolutions demonstrating local support per application form Section 9. C. For projects involving heat: Most recent invoice demonstrating the cost of heating fuel for the building(s) impacted by the project. D. Governing Body Resolution or other formal action taken by the applicant’s governing body or management per RFA Section 1.4 that: • Commits the organization to provide the matching resources for project at the match amounts indicated in the application. • Authorizes the individual who signs the application has the authority to commit the organization to the obligations under the grant. • Provides as point of contact to represent the applicant for purposes of this application. • Certifies the applicant is in compliance with applicable federal, state, and local, laws including existing credit and federal tax obligations. E. An electronic version of the entire application on CD or other electronic media, per RFA Section 1.7. F. CERTIFICATION The undersigned certifies that this application for a renewable energy grant is truthful and correct, and that the applicant is in compliance with, and will continue to comply with, all federal and state laws including existing credit and federal tax obligations and that they can indeed commit the entity to these obligations. Print Name Melanie Bahnke Signature Title President/CEO Date . 5 Alaska Energy Authority Ann: K a rin St. C lair, Grants M a nager 8 13 W Northern Li ghts Blvd nchorage, i\K 99503 grants@akenergyauthori ty.org Ms. St. C lair, <« I t is wi th great pl easure tha t U naatuq, LLC gives their s upport to th e Kawe rak, In c. appli cation for the 2020 i\laska E ne rgy Authority R enewable En er gy fund , Round 13 for th e "Pil grim H ot Sptings Geothe rmal Powerpl ant Design" proj ect. i\s the non-profit uibal consortium fo r th e Be ting Strait R egion, Kawerak su pporlS th e inte rests of all twenty Al aska a ti ve Tribes in our regio n , a nd wo r ks for t.he benefi t of all reside n lS. T he "Pi lgtim H ot Springs G eothermal Powerplant D es ign" project wi ll a ll ow K awerak a nd Unaatuq the cha nce to d esign an o n-site power a nd heat production facility that will s upply sustai n able, cl ea n energy to c urre nt buildings a nd futu r e infrastructure. D ecades of exploration a nd reconnaissan ce work have taken place a t Pilgtim H ot Sptings, most ofte n with the intention of pulJj ng powerJ!om Pi lg rim Hot Springs a nd bringing it back to th e hub city o f Nome. T hj s project wi ll b e o ne oft.h e fir st major attempts to keep th e power p ro du c t.ion a nd transmission on site , bringi ng people, businesses, a nd developmen t !fl. Pilgri m Hot Sptings. Bes id es the curre nt use lo r rec rea ti onal, we lln es s, and to u rism p urposes fo r the ge ne ral publi c, Pil grim is bei ng set up for future agric ultural use th a t will help to ad dress food securi ty concerns in the Be ring Strait Region. The re is a lso inte res t in triba l commu n ity rel oca ti on e fio rts, specifi call y with m emb e rs of the Natj ve Vill age o f Mary's I gloo, whose a nces tors resided near Pi lgri m ho t Sptings and whose ttiba l members have som e of the strongest cul tural a nd historical ti es to the pro p erty. Pilg ti m Hot Sptings is a 320-acre prope rty owned by Unaaruq , LLC, a co nso rt.ium o f seve n regional and local enti ties, inclurung five Alaska ative Cmpora tions, o ne Ttibal Consortium, and o ne no n-profit regio nal Com muni ty Development Quota corp ora ti on. Kawerak is a m(\jmity-owner organization, a nd acts as a co-managing owner alongside Beting Straits Native Cmpora ti o n. The Pilgrim H ot Springs G e neral Ma nager position is housed a t Kawera k, under the Environme n ta l Progra m , Nann-a! Resources Divi sion. i\s a n organization , Kawe ra k h a~ th e m anageri al a nd financial cap acity necessary to m anage th e R enewa ble Energy Fund gt·ant a nd p rojec t activiti es. i\s a n ow ner ofUnaantq , we feel Kawe rak is one of th e m ost capable in ou r cohort to m a ke this proj ec t succeed. T here is potenti al for in frastructure expansion, small business development, a nd econ omi c opportuniti es on the site. U naatuq and Kawerak, Inc. are explo rin g opti ons such as techno logy tes ting gt·o tmds, e lectri c transportation, data center poss ibilities, year-round fo od production, a nd yea r-rou nd recreatio n a nd touri sm opportuniti es. With th e right e ne rgy so urce and a s trong business p lan-Pilgtim H o t Springs has the potenti a l to b e a sought-after we llness, to utis m an d renewab le energy desti natio n thro ugho ut Alaska , the nation, a nd the world . UNAA TU Q. LL C. I PIL GRIM HOT SPRIN GS KA WERAK. INC. PO BOX 948 NOME. AK 9976 2 ~PILGRIMHOTSPRINGS. ~ PIL GR IMHOTSPR I NGS.NET >)) By provi d ing sustainable, cl ean e ne rgy to Pi lgti m Hot Springs usin g the exi sti ng a nd abundan t geothe rmal resource o n site, bu siness develop me nt ac tiviti es m ay continue to grow a nd bring eco nomic benefi t to all reside nts of the Be ring S trait R egion . Thank you fo r yo ur considera tion ofKawerak's a pp lication, and for yo ur continued support o f renewable e nergy proj ects fo r th e great S ta te of Alaska. Si ncerely, Ro{i..h,nfdtec C hai rman, Board of Directors U n aatu q, LLC UNAA TUQ. LLC. I PILGR IM HOT SPRINGS KAWERAK. IN C. PO BOX 948 NOME. AK 99762 eP ILGRIMHOTSPRINGS . ~ PILGRIMHOTSPRINGS .NE T P O B O X 9 0 5 N O M E , A K 9 9 7 6 2 P : 9 0 7 . 3 8 7 . 1 2 0 0 2 7 0 0 G A M B E L L S T R E E T , S U I T E 3 0 0 A N C H O R A G E , A K 9 9 5 0 3 P : 9 0 7 . 9 2 9 . 7 0 0 0 September 22, 2020 Alaska Energy Authority Attn: Karin St. Clair, Grants Manager 813 W Northern Lights Blvd Anchorage, AK 99503 grants@akenergyauthority.org Ms. St. Clair, It is with great pleasure that Sitnasuak Native Corporation gives their support to the Kawerak, Inc. application for the 2020 Alaska Energy Authority Renewable Energy Fund, Round 13 for the “Pilgrim Hot Springs Geothermal Powerplant Design” project. The “Pilgrim Hot Springs Geothermal Powerplant Design” project will allow Kawerak and Unaatuq the chance to design an on-site power and heat production facility that will supply sustainable, clean energy to current buildings and future infrastructure. Besides the current use for recreational, wellness, and tourism purposes for the general public, Pilgrim Hot Springs is being set up for future agricultural use that will help to address food security concerns in the Bering Strait Region. There is potential for infrastructure expansion, small business development, and economic opportunities on the site. Unaatuq and Kawerak, Inc. are exploring options such as technology testing grounds, electric transportation, data center possibilities, year-round food production, and year-round recreation and tourism opportunities. With the right energy source and a strong business plan – Pilgrim Hot Springs has the potential to be a sought-after wellness, tourism and renewable energy destination throughout Alaska, the nation, and the world. Sitnasuak Native Corporation supports these efforts as an owner of Unaatuq, LLC. By providing sustainable, clean energy to Pilgrim Hot Springs using the existing and abundant geothermal resource on site, business development activities may continue to grow and bring economic benefit to all residents of the Bering Strait Region. Thank you for your consideration of Kawerak’s application, and for your continued support of renewable energy projects for Alaska. Sincerely, Charles Fagerstrom Chief Executive Officer Brevig Mission Diomede Elim Gambell Golovin Koyuk Nome Saint Michael Savoonga Shaktoolik Stebbins Teller Unalakleet Wales White Mountain Serving the fisheries of the Bering Strait Region “ NSEDC will participate in the Bering Sea fisheries to provide economic development through education, employment, training and financial assistance to our member communities.” 2701 Gambell Street, Suite 400 Anchorage, AK 99503 (907) 274-2248 Fax: (907) 274-2249 September 21, 2020 Ms. Karin St. Clair, Grants Manager Alaska Energy Authority 813 W Northern Lights Blvd Anchorage, AK 99503 Dear Ms. St. Clair, Norton Sound Economic Development Corporation (NSEDC) fully supports Kawerak, Inc.’s application to the Alaska Energy Authority for the 2020 Renewable Energy Fund, Round 13 for the “Pilgrim Hot Springs Geothermal Powerplant Design” project. NSEDC is the Community Development Quota (CDQ) group representing 15 member communities in the Norton Sound/Bering Strait region. The development of efficient, clean energy infrastructure aligns with NSEDC’s mission and values aimed at developing the economies and improving the quality of life for residents in our member communities. The “Pilgrim Hot Springs Geothermal Powerplant Design” project will provide Kawerak and Unaatuq the chance to design an on-site power and heat production facility to supply sustainable, clean energy to current buildings and future infrastructure. In addition to supporting the existing purposes of the property to provide recreational, wellness, and tourism opportunities to the general public, this project will also bolster the plans to utilize Pilgrim Hot Springs as an agricultural site to help address food security concerns in the Bering Strait Region. There is potential for infrastructure expansion, small business development, and economic opportunities on the site. Kawerak and Unaatuq are exploring business concepts such as Information Technology systems (i.e. a cloud-based data storage center that may thrive in a colder climate), electric transportation, year-round food production, and year-round recreation and tourism opportunities. With the right energy source and a strong business plan, Pilgrim Hot Springs has the potential to be a sought-after wellness, tourism and renewable energy destination throughout Alaska, the nation, and the world. By providing sustainable, clean energy to Pilgrim Hot Springs using the existing and abundant geothermal resource on site, business development activities may continue to grow and bring economic benefit to all residents of the Norton Sound/Bering Strait region. NSEDC supports these efforts, as we support economic development opportunities for all of our member communities. Thank you for your consideration of Kawerak’s application, and for your continued support of renewable energy projects for the great state of Alaska. Sincerely, Janis Ivanoff President & CEO Alaska Encrb'Y Authmity Alln: Ka1in St. Clair, Gr<mls M<magcr 81 :~ W Nm1hcm Lights Blvd Anchorage, AK 9950H gr.ntts®akcltcr~,ryautlt<>Iily.<>rg Ms. St. Clair, COUNCIL NATIVE CORPORATION 606 E5m AVE PO BOX tum NOME, AK 99762 JH3-651 :~ phone 113-5965 f~lX council@arcl ic .net It is \\ith great pleasure that Council Native Corporation ~,rives their suppm11o the Kawcrak, Inc. application f(>r the 2020 Alaska Energy Authmity Renewable EncrJ,'Y Fund, Hound l~lf(>r the "PilJ,'lim Hot Sp1in1,rs Geothermal Powcrplanl Design" project. The "Pilgtim Hot Sp1ings Gcothcnnal Powcrplanl Design" prqjcct will allow Kawcrak <md l Jnaatuq the ch;mcc to design an on-site power ;md heat production facility that will supply sustainable, dean cncrJ,'Y to cmTcnl huildin~,rs and future infi<tslructurc. Besides the cuncnl usc f(>r recreational, wcllncss, and tourism purposes f(>r the general public, Pilg~im Hot Springs is being set up for future agticuhum.l usc that "ill help to address f(>Od sccmity conccms in the Bering Strait Region. There is potential lor inti·astmcturc expansion, small business development, and economic opportunities on the site. Unaatuq and Kawcr.tk, Inc. arc exploring options such as technology testing J,'l·oull<ls, clcchic h<msportation, data center possibilities, year-round f(><>d production, <md year-round recreation and tourism oppm1unitics. With the 1ight energy source and a strong business plan -Pil1,rrim Hot S(>Iings has the potential to he a sought-allcr wcllncss, tomism and renewable cnerb'Y destination throughout Alaska, the nation, and the world. Council Native Coq>Omtion suppm1s these cfl<>rts as an owner of l J naatuq, l.LC. By providing sustaiilablc, dean energy to PilJ,'lim Hot Sprin~,rs using the existing <md ahund;mt geothermal resource on site, business development activities may continue to J,'l"O'W and I>Iing economic benefit to all residents of the Bering Strait Region. Thank you f(>r your consideration of Kawcrak's application, and f(>r your continued support of rcncwahlc cncrJ,'Y projects lor Alaska. Sincerely, £n~7 Council Native Corpomtion Mary’s Igloo Native Corporation Box 650 Teller, Alaska 99778 (907) 642-2308 migloonativecorp@gmail.com Alaska Energy Authority Attn: Karin St. Clair, Grants Manager 813 W Northern Lights Blvd Anchorage, AK 99503 grants@akenergyauthority.org September 25, 2020 Ms. St. Clair, It is with pleasure that Mary’s Igloo Native Corporation gives their support to the Kawerak, Inc. application for the 2020 Alaska Energy Authority Renewable Energy Fund, Round 13 for the “Pilgrim Hot Springs Geothermal Powerplant Design” project. The “Pilgrim Hot Springs Geothermal Powerplant Design” project will allow Kawerak and Unaatuq the chance to design an on-site power and heat production facility that will supply sustainable, clean energy to current buildings and future infrastructure. Besides the current use for recreational, wellness, and tourism purposes for the general public, Pilgrim Hot Springs is being set up for future agricultural use that will help to address food security concerns in the Bering Strait Region. Mary’s Igloo Native Corporation (MINC) supports the project as an owner of Unaatuq, LLC. There is potential for infrastructure expansion, small business development, and economic opportunities on the site and to the adjacent land owners, MINC. Unaatuq and Kawerak, Inc. are exploring options such as technology testing grounds, electric transportation, data center possibilities, year-round food production, and year-round recreation and tourism opportunities. With the right energy source and a strong business plan – Pilgrim Hot Springs has the potential to be a sought-after wellness, tourism and renewable energy destination throughout Alaska, the nation, and the world. By providing sustainable, clean energy to Pilgrim Hot Springs using the existing and abundant geothermal resource on site, business development activities may continue to grow and bring economic benefit to the adjacent land owners, MINC, and all residents of the Bering Strait Region. Thank you for your consideration of Kawerak’s application, and for your continued support of renewable energy projects for Pilgrim Hot Springs and all of Alaska. Sincerely, Dora Mae Hughes President, Mary’s Igloo Native Corporation REPRESENTING) Brevig'Mission' Sitaisaq) Council' Diomede' Ifaliq) Elim' Niviarcaurluq) Gambell' Sivuqaq) Golovin' Chinik) King'Island' Ugiuvak) Koyuk' Kuuyuk) Mary’s'Igloo' Qawiaraq) Nome'Eskimo' Sitnasuak)Inuit) Savoonga' Sivungaq) Shaktoolik' Saktuliq) Shishmaref' Qikiqtaq) Solomon' Afuutaq) St.'Michael' Taciq) Stebbins' Tapraq ) Teller' Tala) Unalakleet' Ufalaqłiq) Wales' Kifigin) White'Mountain' Iġałuik)/) Nutchirviq) Advancing)the)capacity)of)our)people)and)tribes)for)the)benefit)of)the)region. PO)Box)948)•)Nome)Alaska)99762)•)907.443.5231)•)www.kawerak.org)) Alaska Energy Authority Attn: Karin St. Clair, Grants Manager 813 W Northern Lights Blvd Anchorage, AK 99503 grants@akenergyauthority.org Ms. St. Clair, As the President of Kawerak, Inc., I am pleased to give support for Kawerak’s application to the 2020 Alaska Energy Authority Renewable Energy Fund, Round 13 for the “Pilgrim Hot Springs Geothermal Powerplant Design” project. As the non-profit tribal consortium for the Bering Strait Region, Kawerak supports the interests of all twenty Alaska Native Tribes in our region, and works for the benefit of all residents. The “Pilgrim Hot Springs Geothermal Powerplant Design” project will allow Kawerak and Unaatuq the chance to design an on-site power and heat production facility that will supply sustainable, clean energy to current buildings and future infrastructure. Decades of exploration and reconnaissance work have taken place at Pilgrim Hot Springs, most often with the intention of pulling power from Pilgrim Hot Springs and bringing it back to the hub city of Nome. This project will be one of the first major attempts to keep the power production and transmission on site, bringing people, businesses, and development to Pilgrim Hot Springs. We look forward to partnering with the University of Alaska Fairbanks’ Alaska Center for Energy and Power on this project and are grateful for their technical expertise in geothermal technologies, as well as their past experience working on site at Pilgrim Hot Springs. Besides the current use for recreational, wellness, and tourism purposes for the general public, Pilgrim is being set up for future agricultural use that will help to address food security concerns in the Bering Strait Region. There is also interest in tribal community relocation efforts, specifically with members of the Native Village of Mary’s Igloo, whose ancestors resided near Pilgrim Hot Springs and whose tribal members have some of the strongest cultural and historical ties to the property. Pilgrim Hot Springs is a 320-acre property owned by Unaatuq, LLC, a consortium of seven regional and local entities. Kawerak is a majority-owner organization, and we act as a co-manager alongside Bering Straits Native Corporation. The Pilgrim Hot Springs General Manager position is housed at Kawerak, under our Environmental Program, Natural Resources Division. There is potential for infrastructure expansion, small business development, and economic opportunities on the site. Unaatuq and Kawerak, Inc. are exploring options such as technology testing grounds, electric transportation, data center possibilities, year-round food production, and year-round recreation and tourism opportunities. With the right energy source and a strong business plan, Pilgrim Hot Springs has the potential to be a sought-after wellness, tourism and renewable energy destination throughout Alaska, the nation, and the world. By providing sustainable, clean energy to Pilgrim Hot Springs using the existing and abundant geothermal resource on site, business development activities may continue to grow and bring economic benefit to all residents of the Bering Strait Region. Thank you for your consideration of Kawerak’s application, and for your continued support of renewable energy projects for Alaska. Sincerely, Melanie Bahnke CEO/President WHITE MOUNTAIN ~ NATIVECORP ORATION · ' ~ P .O. Box 84089 White Mountain, AK 99784 Phone (907) 638-5000, Email wmnc.mgr@gmail.com Alaska Energy Authority Attn: Karin St. Clair, Grants Manager 813 W Northern Lights Blvd Anchorage, AK 99503 grants@akenergyauthority.org Ms. St. Clair, White Mountain Native Corporation gives their support for the K awerak, Inc . application for the 2020 Alaska Energy Authority R enewable Energy Fund, Round 13 for the "Pilgrim Hot Springs Geothermal Powerplant D esign" proj ect. The "PilgJim Hot Springs Geothermal Powerplant Design" project will allow Kawerak and Unaatuq the chance to design an on-site power and h ear production facility that will supply sustainable, clean energy to current buildings and future infrastructure. Besides th e current usc for recreati onal, wellness, and tourism purposes for the general public, Pilgrim Hot Springs is being se t up for fi.t ture agricultu ra l use that wi ll help to address food secutity concerns in the Bering Strait R egion. There is potential for infrastructure expansion, small business development, and economic opportunities on the site. Unaatuq and Kawerak arc cxpl o1ing options such as technology testing grounds, electric transportation, data center possibilities, year-round food production, and year-round recreation and tourism opportunities. With the right energy source and a strong business plan, Pilgtim Hot Springs has the potential to be a sought-after wellness, tourism and renewable energy destination throughout Alaska, the nation, and the world. White Mountain Native Corporation supports these effo rts as an O'vvner ofUnaatuq, LLC. By providing sustainable, clean energy to Pilgrim Hot Springs using the existing and abundant geothermal resource on site, business development activi ties may continue to grow and bring economic benefit to all residents of the Bering Strait R egion. Thank you for your consideration ofKa·werak's application, and for your continued support of renewable energy projects for Alaska. Sincerely, l~ White Mountain Native Corporation KAWERAK, INC. FINANCIAL STATEMENTS AND FEDERAL AND STATE SINGLE AUDITS Years ended December 31, 2019 and 2018 KAWERAK, INC. FINANCIAL STATEMENTS AND FEDERAL AND STATE SINGLE AUDITS Years ended December 31, 2019 and 2018 TABLE OF CONTENTS Page INDEPENDENT AUDITOR’S REPORT 1 FINANCIAL STATEMENTS Statements of financial position 3 Statements of activities 4 Statement of functional expenses – 2019 5 Statement of functional expenses – 2018 6 Statements of cash flows 7 Notes to financial statements 8 SUPPLEMENTARY INFORMATION Independent auditor’s report on supplementary information 29 Combining statement of revenues and expenses Education & Employment Supportive Services Division 30 Community Services Division 36 Natural Resources Division 43 Administration Division 48 Statement of revenues and expenses - budget and actual Rural Child Welfare Services Program – FY19 52 Rural Child Welfare Services Program – FY20 53 Children’s Advocacy Center – FY19 54 Children’s Advocacy Center – FY20 55 Native Employment Work Services – FY19 56 Native Employment Work Services – FY20 57 Behavioral Health & Early Intervention – FY19 58 Behavioral Health & Early Intervention – FY20 59 FEDERAL SINGLE AUDIT REPORTS AND SCHEDULES Schedule of expenditures of federal awards 61 Notes to schedule of expenditures of federal awards 63 Independent auditor’s report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards 64 Independent auditor’s report on compliance for each major program and on internal control over compliance required by the Uniform Guidance 66 Schedule of findings and questioned costs 68 -i- KAWERAK, INC. FINANCIAL STATEMENTS AND FEDERAL AND STATE SINGLE AUDITS Years ended December 31, 2019 and 2018 TABLE OF CONTENTS, CONTINUED Page STATE SINGLE AUDIT REPORTS AND SCHEDULES Schedule of state financial assistance 70 Notes to schedule of state financial assistance 71 Independent auditor’s report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards 72 Independent auditor’s report on compliance for each major state program and report on internal control over compliance required by the State of Alaska Audit Guide and Compliance Supplement for State Single Audits 74 Schedule of findings and questioned costs 76 -ii- KOHLER, SCHMITT & HUTCHISON A Professional Corporation Certified Public Accountants 714 4th Avenue, Suite 303 • (907) 456-6676 • Fax 456-6431 P.O. Box 70607, Fairbanks, Alaska 99707-0607 • ksh@kshcpa.com INDEPENDENT AUDITOR’S REPORT Board of Directors Kawerak, Inc. Report on the Financial Statements We have audited the accompanying financial statements of Kawerak, Inc. (a nonprofit organization), which comprise the statements of financial position as of December 31, 2019 and 2018, and the related statements of activities, functional expenses, and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kawerak, Inc. as of December 31, 2019 and 2018, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the financial statements, Kawerak, Inc. has adopted the requirements of the Financial Accounting Standards Board’s Accounting Standards Updates 2016-01-Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, 2018-08-Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made, and 2014-09-Revenue From Contracts with Customers (Topic 606) as of and for the year ended December 31, 2019. Our opinion is not modified with respect to these matters. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of state financial assistance, as required by the State of Alaska Audit Guide and Compliance Supplement for State Single Audits, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our reports dated May 26, 2020, on our consideration of Kawerak, Inc.’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of those reports is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the effectiveness of Kawerak, Inc.’s internal control over financial reporting or on compliance. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards in considering Kawerak, Inc.’s internal control over financial reporting and compliance. May 26, 2020 Fairbanks, Alaska -2- 2019 2018 CURRENT ASSETS Cash and cash equivalents $20,411,498 21,951,248 Receivables, net of allowance of $-0- and $1,442 Grants and contracts 1,783,540 1,333,611 Refundable income taxes 99,183 111,705 Other 75,592 201,259 Inventory 24,450 38,751 Prepaids and deposits 167,272 114,236 Total current assets 22,561,535 23,750,810 PROPERTY AND EQUIPMENT 20,603,469 19,268,639 Less accumulated depreciation (8,864,093) (7,900,812) 11,739,376 11,367,827 OTHER ASSETS Certificate of deposit 503,512 501,753 Marketable securities 8,396,199 7,339,490 Investment in Tumet Industries, LLC 3,229,779 3,290,678 Investment in Unaatuq, LLC 483,817 450,507 Total other assets 12,613,307 11,582,428 Total assets $46,914,218 46,701,065 CURRENT LIABILITIES Accounts payable 1,030,485 2,866,082 Accrued payroll liabilities 1,244,843 1,510,504 Income taxes payable - 74,396 Deferred revenue 17,037,375 16,475,737 Current portion of long-term debt 112,000 112,000 Total current liabilities 19,424,703 21,038,719 LONG-TERM DEBT, less current portion 644,668 756,668 DEFERRED INCOME TAXES 369,222 380,746 Total liabilities 20,438,593 22,176,133 NET ASSETS Without donor restrictions 26,276,542 24,322,588 With donor restrictions 199,083 202,344 Total net assets 26,475,625 24,524,932 Total liabilities and net assets $46,914,218 46,701,065 See notes to financial statements. LIABILITIES AND NET ASSETS ASSETS KAWERAK, INC. STATEMENTS OF FINANCIAL POSITION December 31, 2019 and 2018 -3- 2019 2018 CHANGES IN NET ASSETS WITHOUT DONOR RESTRICTIONS Changes in net assets without donor restriction from operating activities Revenues and support: Governmental grants $34,993,462 35,643,005 Ramah settlement - 67,346 Investment income 191,333 174,699 Other 2,478,892 2,764,760 Total revenues and support 37,663,687 38,649,810 Net assets released from restrictions 780,305 909,527 Total revenues, support and reclassifications without donor restrictions 38,443,992 39,559,337 Expenses: Program expenses Education & Employment Supportive Services 9,561,100 8,963,658 Community Services 14,364,379 15,995,802 Natural Resources 2,720,382 2,254,443 Administration 3,272,101 3,443,206 Total program expenses 29,917,962 30,657,109 Management and general 7,368,383 7,261,635 Fundraising 41,023 50,615 Total operating expenses 37,327,368 37,969,359 Increase (decrease) in net assets without donor restrictions from operating activities 1,116,624 1,589,978 Changes in net assets without donor restriction from nonoperating activities Investment in Tumet Industries, LLC (60,899) 519,234 Investment in Unaatuq, LLC (13,311) (73,000) Realized gains (losses)155,151 98,252 Unrealized gains (losses) on investments 748,059 (620,844) Provision for income tax (expense) benefit 8,330 25,377 Excess (deficiency) of revenues over (under) expenses 837,330 (50,981) Increase (decrease) in net assets without donor restrictions 1,953,954 1,538,997 CHANGES IN NET ASSETS WITH DONOR RESTRICTIONS Contributions 777,044 824,890 Net assets released from restrictions (780,305) (909,527) Increase (decrease) in net assets with donor restrictions (3,261) (84,637) Changes in net assets 1,950,693 1,454,360 NET ASSETS, January 1 24,524,932 23,070,572 NET ASSETS, December 31 $26,475,625 24,524,932 See notes to financial statements. KAWERAK, INC. STATEMENTS OF ACTIVITIES Years ended December 31, 2019 and 2018 -4- Education & Employment Supportive Services Community Services Natural Resources Administration Subtotal Management and General Fundraising Total Direct expenses: Personnel services $5,310,030 3,804,943 1,647,212 629,431 11,391,616 5,246,029 - 16,637,645 Professional services 47,341 926,208 - - 973,549 105,686 - 1,079,235 Travel and per diem 398,625 681,828 373,430 154,259 1,608,142 101,388 - 1,709,530 Supplies 222,956 374,903 95,333 71,705 764,897 144,936 7,709 917,542 Equipment 235,738 105,179 (1,995) 2,559 341,481 22,032 - 363,513 Vehicle expense 10,663 21,962 171 - 32,796 4,452 - 37,248 Contractual services 464,651 7,963,818 457,397 377,897 9,263,763 188,641 - 9,452,404 Facilities expense 308,038 200,788 1,982 120,767 631,575 613,793 - 1,245,368 Insurance expense 70,252 55,590 6,169 5,092 137,103 51,137 - 188,240 Pass-through programs - - - 1,749,592 1,749,592 - - 1,749,592 Depreciation expense - - - - - 300,003 - 300,003 Interest expense - - - - - 31,563 - 31,563 Building costs 73,070 - - - 73,070 60,721 - 133,791 Adult vocational training 148,783 - - - 148,783 - - 148,783 Direct employment 6,243 - - - 6,243 - - 6,243 Other programs support 720,934 80,024 64,912 11,021 876,891 2,140 - 879,031 Scholarships, awards and donations 359,465 - - - 359,465 - 32,680 392,145 Training and tuition 72,304 14,508 1,099 979 88,890 12,637 - 101,527 Grant entitlement 101,445 27,582 - - 129,027 - - 129,027 Board administration and fees - - 48,686 - 48,686 261,553 - 310,239 Other operating expenses 18,050 31,241 18,141 23,179 90,611 110,420 634 201,665 Total direct expenses 8,568,588 14,288,574 2,712,537 3,146,481 28,716,180 7,257,131 41,023 36,014,334 Nondirect expenses Depreciation expense 454,009 75,805 7,845 125,620 663,279 - - 663,279 Donated goods and services 538,503 - - - 538,503 111,252 - 649,755 Total nondirect expenses 992,512 75,805 7,845 125,620 1,201,782 111,252 - 1,313,034 Total expenses $9,561,100 14,364,379 2,720,382 3,272,101 29,917,962 7,368,383 41,023 37,327,368 See notes to financial statements. -5- KAWERAK, INC. STATEMENT OF FUNCTIONAL EXPENSES Year ended December 31, 2019 Supporting ServicesProgram Education & Employment Supportive Services Community Services Natural Resources Administration Subtotal Management and General Fundraising Total Direct expenses: Personnel services $5,134,813 3,566,883 1,599,690 779,351 11,080,737 5,023,954 - 16,104,691 Professional services 67,626 911,484 - - 979,110 128,039 - 1,107,149 Travel and per diem 436,646 584,898 267,246 132,175 1,420,965 125,228 - 1,546,193 Supplies 276,865 274,074 77,878 135,862 764,679 155,781 21,407 941,867 Equipment 16,368 14,176 15,252 23,009 68,805 30,004 - 98,809 Vehicle expense 14,599 30,856 1,236 9,206 55,897 14,043 - 69,940 Contractual services 107,954 9,714,800 154,691 346,760 10,324,205 154,084 - 10,478,289 Facilities expense 449,905 174,788 1,632 125,799 752,124 614,339 - 1,366,463 Insurance expense 65,297 63,675 7,361 2,366 138,699 55,271 - 193,970 Pass-through programs - 190,000 - 1,730,710 1,920,710 - - 1,920,710 Depreciation expense - - - - - 305,590 - 305,590 Interest expense - - - - - 31,887 - 31,887 Building costs 13,223 195 - - 13,418 79,186 - 92,604 Adult vocational training 91,120 - - - 91,120 - - 91,120 Direct employment 17,842 - - - 17,842 - - 17,842 Other programs support 689,484 304,156 54,025 16,836 1,064,501 1,919 - 1,066,420 Scholarships, awards and donations 306,667 1,000 - - 307,667 - 28,156 335,823 Training and tuition 55,009 12,158 200 4,508 71,875 3,299 - 75,174 Grant entitlement 75,959 25,671 - - 101,630 - - 101,630 Board administration and fees - - 31,758 - 31,758 293,080 - 324,838 Other operating expenses 32,281 37,048 34,422 16,347 120,098 102,639 1,052 223,789 Total direct expenses 7,851,658 15,905,862 2,245,391 3,322,929 29,325,840 7,118,343 50,615 36,494,798 Nondirect expenses Depreciation expense 379,519 89,940 9,052 120,277 598,788 - - 598,788 Donated goods and services 732,481 - - - 732,481 143,292 - 875,773 Total nondirect expenses 1,112,000 89,940 9,052 120,277 1,331,269 143,292 - 1,474,561 Total expenses $8,963,658 15,995,802 2,254,443 3,443,206 30,657,109 7,261,635 50,615 37,969,359 See notes to financial statements. KAWERAK, INC. STATEMENT OF FUNCTIONAL EXPENSES Year ended December 31, 2018 Supporting Services -6- Program 2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from governmental grants $35,105,171 36,977,482 Cash received from contributed support 238,541 92,409 Interest received 184,747 172,203 Cash received from other operating income 2,478,892 2,764,760 Cash received from Ramah settlement - 67,346 Income taxes (paid) refunds received (65,068) 21,277 Interest paid (31,563) (31,887) Cash paid to employees and suppliers (37,623,921) (35,222,042) Net cash provided (used) by operating activities 286,799 4,841,548 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equipment and building improvements (1,334,831) (2,483,539) Gross proceeds from sale of marketable securities 3,304,559 1,963,707 Purchases of marketable securities (3,458,066) (2,107,023) Distribution from Tumet Industries, LLC (156,140) - Investment in Unaatuq, LLC (70,071) (46,160) Net cash provided (used) by investing activities (1,714,549) (2,673,015) CASH FLOWS FROM FINANCING ACTIVITIES Payment on long-term debt (112,000) (112,000) Net cash provided (used) by financing activities (112,000) (112,000) Net increase (decrease) in cash and cash equivalents (1,539,750) 2,056,533 CASH AND CASH EQUIVALENTS, January 1 21,951,248 19,894,715 CASH AND CASH EQUIVALENTS, December 31 $20,411,498 21,951,248 RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Change in net assets 1,950,693 1,454,360 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 963,282 904,378 Investment in Tumet Industries, LLC 60,899 (519,234) Investment in Unaatuq, LLC 13,311 73,000 Realized gains (losses) on investments (155,151) (98,252) Unrealized gains (losses) on investments (748,059) 620,844 Changes in: Receivables (157,351) (206,648) Inventory 14,301 (27,226) Prepaids and deposits (53,036) 37,649 Accounts payable (1,812,147)901,128 Accrued payroll liabilities (265,661) 152,047 Income taxes payable (74,396) 74,396 Deferred revenue 561,638 1,660,411 Deferred income taxes (11,524) (185,305) Net cash provided (used) by operating activities $286,799 4,841,548 See notes to financial statements. KAWERAK, INC. STATEMENTS OF CASH FLOWS Years ended December 31, 2019 and 2018 -7- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2019 Kawerak, Inc. (Kawerak) was incorporated as a nonprofit organization under Alaska State Law in 1973 to promote social and economic welfare to the members of the 20 federally recognized tribes (Member Tribes) in the Bering Strait Region (Region). It is a regional Native non-profit, authorized by tribal resolution from the Member Tribes to compact with the federal government and provide services on their behalf. Kawerak is governed by a Board of Directors comprised of the Presidents (or designee) of the Member Tribes, two elder representatives and a representative from the regional health care provider. Kawerak is funded primarily with a federal Department of Interior Compact of Self- Governance and other federal and State of Alaska grants. During 2007, Kawerak formed a single member limited liability company, Tumet Industries, LLC, a for profit entity, for the purpose of contracting and construction of highway and heavy construction projects in the Bering Strait Region of Alaska. In 2008, Tumet became a multi- member limited liability company. (See Note 8). In 2010, Kawerak invested in Unaatuq, LLC, the entity that purchased the Pilgrim Hot Springs property. (See Note 8). Kawerak’s primary focus is to direct and administer federal, state and local social service programs to meet the Region’s basic needs of families and to help sustain and develop the communities in which they live. Below is a summary of the principal programs administered by Kawerak Inc. Education and Employment Supportive Services The Education and Employment Supportive Services Division (EESSD) is designed to increase the number of trained, educated and employed tribal members and to provide early childhood services to address the needs of children and families. Kawerak provides financial support, comprehensive case management, education, and training and technical assistance to assist tribal members in reaching their educational objectives or secure employment or complete employment goals to become self-sufficient. Community Services The Community Services Division (CSD) provides public safety and wellness services and other programs designed to improve the economy, financial management and infrastructure of the region’s communities. CSD provides services to address the needs of children and families throughout the Bering Strait Region. It also includes the Kawerak Transportation Program which provides comprehensive transportation services throughout the region. Natural Resources The Natural Resources Division (NRD) conducts research projects and advocates for tribes’ continued subsistence uses in federal and state resource management decision making and encourages the use of traditional knowledge regarding natural resources including the ecosystem, land, fish, animals and birds in the Bering Strait region. Administration The Administration Division oversees operations, develops strategic actions, and facilitates interagency partnerships. -8- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of Kawerak, Inc. is presented to assist in understanding the Corporation’s financial statements. The financial statements and notes are representations of the Corporation’s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. a. Basis of presentation - Financial statement presentation follows the recommendations of the FASB ASC Topic 958 Not-For-Profit Entities. Under this standard the Corporation is required to report information regarding its financial position and activities according to two classes of net assets: net assets without donor restrictions and net assets with donor restrictions.  Net assets without donor restrictions – not subject to donor-imposed stipulations and include unrestricted revenues from grants, contracts, and contributions and expenses associated with the principal mission of the Corporation.  Net assets with donor restrictions – net assets whose use is limited by donor-imposed time and/or purpose restrictions. Revenues are reported as increases in net assets without donor restriction unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in net assets without donor restriction. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor stipulation or by law. Expirations of donor restrictions on the net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications between the applicable classes of net assets. The Corporation classifies donor restricted contributions as without donor restriction to the extent that donor restrictions were met in the year contribution was received. b. Cash and cash equivalents - For the purposes of the statement of cash flows, the Corporation considers all savings accounts and short-term investments with a maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates the fair value because of the short-term maturity of those financial instruments. c. Accounts receivable – Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Kawerak does not charge interest on past due accounts. The carrying amount of the accounts receivable approximates fair value because of the short-term maturity of these financial instruments. d. Payables- The carrying amount of payables approximates their fair value because of the short-term maturity of these instruments. No collateral or security is pledged for short-term payables. e. Inventory consists of office supplies and logo wear jackets and is stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. f. Property and equipment – Property and equipment with an acquisition cost of $5,000 or more are recorded at cost or at estimated fair value at date of gift. Prior to 2008, equipment and furniture funded with grant funds were not capitalized. Depreciation is recorded on the straight-line basis over the estimated useful life of the asset. Kawerak does not capitalize works of art and art collections. -9- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED g. Marketable securities – The Corporation carries investments in equity securities with readily determinable fair values at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets without donor restrictions in the accompanying statement of activities. h. Deferred revenue – Grant or contract proceeds advanced by a governmental agency in excess of reimbursable expenses are recorded as deferred income. i. Equity investments – Investments in Tumet Industries, LLC and Unaatuq, LLC are reported using the equity method of accounting which requires Kawerak to report its proportional share of income or loss from the entities in its statement of activities and its equity in the entities as an asset. j. Fair Value Option - FASB ASC 825 The Fair Value Option for Financial Assets and Financial Liabilities provides the Corporation the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis with the difference between the carrying value before election of the fair value option and the fair value recorded upon election as an adjustment to beginning net assets. The Corporation has not elected this fair value option for any eligible financial asset or liability except marketable securities as noted above. k. Contributions – All contributions are considered to be available for general use unless specifically restricted by the donor. Contributions that are received and designated for future periods or restricted by the donor for specific purposes are reported as restricted support that increases net assets with donor restrictions. When a restriction expires, net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the statement of activities as net assets released from restrictions. l. Contributed services, materials and supplies – The Corporation recognizes contributions of tangible assets at fair value when received. Contributed professional services are recognized at fair value if the services received (a) create or enhance long-lived assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. m. Functional allocation of expenses - The costs of providing the programs and other activities has been summarized on a functional basis in the statement of activities. Accordingly, expenses that benefit both programs and supporting services have been allocated using management’s estimates on a reasonable basis that is consistently applied. These estimates include allocations based on square footage, number of personnel or other measures applicable to the expense. n. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. -10- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED o. Income taxes – Kawerak, Inc. is exempt from income taxes as a nonprofit corporation under section 501(c)(3) of the Internal Revenue Code and has been classified by the Internal Revenue Service as other than a private foundation within the meaning of Section 509(a)(1) of the Internal Revenue Code. Kawerak is subject to income tax on its unrelated business activities such as gaming income and interests in Tumet Industries, LLC and Unaatuq, LLC. Income taxes are provided for the tax effects of the unrelated business activities’ transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and tax reporting. Deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled. FASB ASC 740 Accounting for Uncertainty in Income Taxes requires Kawerak to recognize a liability for uncertain tax positions where a liability would more likely than not be assessed by a taxing authority. Recognition of a liability, if any, is subject to estimation and management judgment. No liabilities have been recognized in the 2019 financial statements. p. New Accounting Pronouncements – During the year ended December 31, 2019, Kawerak, Inc. adopted the requirements of the Financial Accounting Standards Board’s Accounting Standards Update No. 2016-01- Financial Instruments -Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. Financial instruments affected by this new pronouncement are cash, short-term receivables, and short- term payables and long-term debt. The pronouncement has not caused significant change to the financial statements as these financial instruments were already presented separately. Fair value measurements for short-term and long-term financial instruments are described in these accompanying notes to the financial statements. During the year ended December 31, 2019, Kawerak, Inc, adopted the requirements of the Financial Accounting Standards Board’s Accounting Standards Update No, 2016-08-Statement of Cash Flows (Topic 230): Restricted Cash, which requires the statement of cash flows to explain the change during the period in total cash, cash equivalents and restricted cash, For the years ended December 31, 2019 and 2018, Kawerak, Inc. did not have restricted cash. During the year ended December 31, 2019, Kawerak, Inc, adopted the requirements of the Financial Accounting Standards Board’s Accounting Standards Update No. 2018-08-Not-for-Profit Entities (Subtopic 958-605): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, which clarifies whether a transfer of assets is a contribution or an exchange transaction. The provision clarifies how an entity determines whether a resource provider is participating in an exchange transaction by evaluating whether the resource provider is receiving commensurate value in return for the resources transferred. The provision requires that an entity determine whether a contribution is conditional on the basis of whether an agreement includes a barrier that must be overcome and either a right of return of assets transferred or a right of release of promisor’s obligation to transfer assets. If a contribution has been deemed unconditional, an entity would then consider whether the contribution is restricted on the basis of the donor-imposed restriction. The pronouncement has not caused significant impact to Kawerak’s accounting policies and procedures as they have historically already applied these criteria to their contributions, grants, and exchange transactions. -11- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 p. New Accounting Pronouncements, Continued - During the year ended December 31, 2019, Kawerak, Inc. also adopted the provisions of Accounting Standards Update 2014-09: (Topic 606), Revenue from Contracts with Customers, which requires Kawerak, Inc. to identify its contracts with customers, identify the performance obligations in these contracts, and recognize revenue when the performance obligations have been satisfied. The pronouncement has not caused significant change to Kawerak’s accounting policies as Kawerak, Inc. has historically already applied these criteria to their contracts with customers. q. Reclassifications – Certain reclassifications have been made to the prior year’s financial statement presentation to correspond to the current year’s format. Net assets and changes in net assets are unchanged due to these reclassifications. r. Subsequent events – Management has evaluated subsequent events through May 26, 2020, the date the financial statements were available to be issued. No subsequent events were identified which required accrual. (See Note 18 for information on the impact of COVID-19 on the organization.) 2. LIQUIDITY AND FUNDS AVAILABLE The following reflects the Corporation’s financial assets as of December 31, 2019 and 2018: 2019 2018 Financial assets Cash and cash equivalents $20,411,498 21,951,248 Receivables, net, collected in less than one year 1,958,316 1,646,575 Financial assets available to meet cash needs for general expenditures within one year $22,369,814 23,597,823 None of the financial assets are subject to donor or other contractual restrictions that make them unavailable for general expenditure within one year of the balance sheet date. The accounts receivable are expected to be collected within the first six months of the next year. All cash amounts are available for normal operating needs. Kawerak Inc. has a goal to maintain financial assets, which consists of cash on hand to meet sixty days of normal operating expenses. Kawerak Inc. has a policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due, and in addition, as part of its liquidity management, there are funds (permanent and reserve investment accounts) established by the governing board that may be drawn upon in the event of financial distress or an immediate liquidity need resulting from events outside the typical life cycle of converting financial assets to cash or settling financial liabilities. In the event of an unanticipated liquidity need, with the board of directors’ approval, the Corporation could draw from its investment accounts. (See Note 7) -12- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 3. CASH AND CASH EQUIVALENTS Cash and cash equivalents at December 31, 2019 and 2018 consist of the following: 2019 2018 Cash on hand $100 100 General and payroll deposit accounts 20,411,398 21,951,148 $20,411,498 21,951,248 Under the Indian Self-Determination and Education Assistance Act, Kawerak may invest advance payments, before such funds are expended for the purposes of the funding agreement, so long as such funds are (1) invested only in obligations of the United States or in obligations or securities that are guaranteed or insured by the United States, or mutual (or other) funds registered with the Securities and Exchange Commission and which only invest in obligations of the United States or (2) deposited only in accounts that are insured by an agency or instrumentality of the United States, or are fully collateralized to ensure protection of the advance funds, even in the event of a bank failure. As of December 31, 2019, the funds in the general and payroll accounts are fully collateralized through a tri- party agreement with Wells Fargo Bank, N. A. and The Bank of New York Mellon. 4. GRANTS & CONTRACTS RECEIVABLE Grants & contracts receivable at December 31, 2019 and 2018 consists of the following: Granting Agency 2019 2018 Inuit Circumpolar Council Alaska $- 1,097 Rasmuson Foundation - 172,658 Zender Environmental Health and Research Group 4,890 - The PEW Charitable Trust 17,365 8,095 North Pacific Research Board - 2,564 University of Alaska Anchorage - 234 Norton Sound Economic Development Corp 59,049 104,977 US Fish and Wildlife Service 47,601 - US Environmental Protection Agency 17,741 26,092 Federal Department of Interior 3,351 3,603 Federal Department of Education 68,184 44,418 Federal Department of Energy 159,036 49,180 Denali Commission 28,488 - Federal Department of Health and Human Services 614,864 551,124 Federal Department of Commerce 232,245 55,648 Federal Department of Agriculture 1,545 41,151 Federal Department of Justice 158,984 57,145 National Science Foundation 10,695 11,006 Federal Department of Transportation 51,623 18,682 Alaska Department of Labor and Workforce Development 41,773 8,522 Alaska Department of Education & Early Development 140,354 107,046 Alaska Department of Health and Social Services 78,622 17,202 Alaska Dept. of Commerce, Community & Economic Development 47,130 53,167 $1,783,540 1,333,611 -13- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 5. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2019 and 2018 consist of the following: Depreciable Lives 2019 2018 Land -$693,007 693,007 Buildings and building improvements 5-25 years 15,439,010 10,946,309 Leasehold improvements 5-10 years 562,877 511,737 Computer equipment 5-15 years 1,731,263 1,731,263 Office furniture and equipment 5-10 years 859,405 859,405 Vehicles 5-10 years 1,317,907 1,245,490 On-going capital projects -- 3,281,428 $20,603,469 19,268,639 In 2002, Kawerak was awarded a grant in the amount of $5,866,744 from the federal Department of Health and Human Services to fund the construction of Head Start buildings in Teller, Elim, Brevig Mission and Gambell, Alaska. The grant incorporated conditions that includes restrictions on usage of the buildings and provided for a continuing federal interest in the buildings from the date of occupancy. Specifically, the buildings may not be (1) used for any purpose inconsistent with that authorized by federal regulation (2) mortgaged or otherwise used as collateral without written permission of the grantor, or (3) sold or transferred to another party without written permission of the grantor. Kawerak occupied the facilities in the spring of 2004. Kawerak capitalized $5,154,052 related to the construction cost of these buildings. As a condition of the grant, in 2002, Kawerak also negotiated long-term land lease agreements with unrelated entities that own the land where the Head Start buildings are situated. The terms of the leases are for 35 years and three of them require annual lease payments of $1. The remaining lease required $542 annual lease payments payable in advance ($18,961 at the time the lease commenced). During 2012, Kawerak purchased for $16,456, the land where the Teller Head Start program is located. In November 2016, Kawerak purchased a building for $1,609,903 with federal funds from the Early Head Start-Child Care Partnership grant through the Department of Health and Human Services. The building was previously leased from the City of Nome. In 2019 and 2018, respectively, Kawerak spent $1,211,274 and $2,912,040 for the building renovations. The building renovations were completed in September 2019 and totaled $4,492,702. Depreciation expense for 2019 was $963,282, including $300,003 charged directly to management and general; $454,009 to Education & Employment Supportive Services Division, $75,805 to the Community Services Division, $7,845 to the Natural Resources Division and $125,620 to the Administration Division in the 2019 statement of functional expense. Depreciation expense for 2018 was $904,378, including $305,590 charged directly to management and general; $379,519 to Education & Employment Supportive Services Division, $89,940 to the Community Services Division, $9,052 to the Natural Resources Division and $120,277 to the Administration Division in the 2018 statement of functional expense. -14- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 6. CERTIFICATE OF DEPOSIT Certificate of deposit (carried at cost plus interest) totaling $503,512 and $501,753 for the years ended December 31, 2019 and 2018, respectively, is included in the statement of financial position. At December 31, 2019, the certificate bears interest at 0.35 percent compounding annually and matures on May 30, 2027. The certificate of deposit is pledged as collateral for Tumet Industries, LLC’ note payable to Wells Fargo. (See Note 8.) 7. MARKETABLE SECURITIES In 2016, Kawerak established two investment accounts (permanent fund and reserve fund) with unrestricted funds for the purpose of preserving capital. The investment accounts are available for use as authorized by the Board of Directors, including investing in assets and use in operation. Investments at December 31, 2019 and 2018 consist of the following: 2019 2018 Marketable securities, at fair value Cash $87,946 102,904 U.S. treasuries 1,413,438 1,501,519 Fixed income 2,483,742 2,166,090 Equity funds 3,489,056 2,827,651 Alternative investments 922,017 741,326 $8,396,199 7,339,490 Cash and fixed income consist of amounts held in U.S. agency securities, foreign and domestic bonds, and exchange traded funds. Equity funds consist of investments in common and preferred equity securities of publicly- traded U.S. and foreign companies, and may also include equity-oriented open-end mutual funds and exchange- traded funds. Alternative investments consist of investments in securities of publicly-traded U.S. & non-U.S. real estate investment trusts (REITs) and commodities. The Corporation retains Alaska Permanent Capital Management, Co. as its financial advisor for its investments that are held at Charles Schwab & Co, Inc. 8. RELATED PARTY TRANSACTIONS Tumet Industries, LLC On March 5, 2007, Kawerak formed Tumet Industries, LLC (Tumet). With the creation of Tumet, Kawerak’s goals were to provide training, employment and income opportunities to village residents; retain and maximize economic benefits of projects within the region; make a profit and generate a source of funding to Kawerak and its member tribes, whereby lessening Kawerak’s dependence on State and Federal funding sources for service delivery; protect Kawerak’s non-profit corporate assets; create a vehicle to contract with the State of Alaska and other entities to undertake road and airport construction and maintenance work in our villages; and improve the transportation infrastructure in the region. -15- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 8. RELATED PARTY TRANSACTIONS, CONTINUED Tumet Industries, LLC, Continued Effective January 1, 2008, Kawerak’s ownership in Tumet decreased from 100 percent to 49 percent with the federally recognized Tribal governments of Teller, Mary’s Igloo, Brevig Mission, Council, Stebbins, St. Michael, Unalakleet, Shaktoolik, Elim, Koyuk, White Mountain, Chinik Eskimo Community, Diomede, Shishmaref and Wales each contributing $50 for a 3.4 percent ownership interest and collectively owning 51 percent. During 2016, the federally recognized Tribal governments of Gambell and Solomon joined Tumet as owners contributing $50 each. After the addition of the two new Tribal Organizations, Kawerak’s ownership in Tumet decreased to 42.2 percent and the seventeen Tribal Organizations each own 3.4 percent of the ownership interest. As of December 31, 2019, and 2018 (as restated), respectively, Tumet financial information is as follows: Tumet had $7,528,111 and $7,824,661 in assets; $612,135 and $857,614 in liabilities; and $6,915,975 and $6,967,048 in member’s equity. Tumet’s net income (loss) was ($51,073) and $1,230,412 for 2019 and 2018, respectively. Kawerak’s proportional share of ($21,553) and $519,234 for 2019 and 2018, respectively, is reflected in the statement of activities. Tumet’s 2018 financial statements have been restated to reflect the retrospective application of the new revenue standards. As a result, the net income for 2018 was reduced from $1,230,412 to $1,137,176, a reduction of $93,236. Kawerak’s proportionate share of the reduction to 2018 net income of ($39,346) is reflected in the 2019 statement of activities. The total change in the Tumet investment was ($60,899) for 2019. Included in other receivables in the statement of financial position is $0 and $156,140 for December 31, 2019 and 2018, respectively, due from Tumet to cover Unrelated Business Taxable Income (UBTI) taxes owed by Kawerak with respect to its proportional share of Tumet’s income. In September 2010, Kawerak signed a continuing guaranty, on behalf of Tumet, with Wells Fargo Equipment Finance, Inc. (Wells Fargo). Under this agreement, Kawerak as guarantor, unconditionally guarantees to Wells Fargo the full and prompt payment and performance when due of any and all indebtedness of Tumet to Wells Fargo. Kawerak is also guarantor of Tumet’s $1 million revolving line of credit with Wells Fargo. The note bears interest at a variable rate of 1.500 percentage points below an index rate, with initial rate of 3.75 percent and matures November 3, 2027. There were no advances outstanding at December 31, 2019. In May 2017, Tumet signed a note payable to Wells Fargo for $500,000, including interest of 2.75 percent and maturing December 2027. This note is secured by a $500,000 certificate of deposit owned by Kawerak and held by Wells Fargo Bank. (See Note 6) In May 2018, Kawerak publicly advertised the project and awarded Tumet the contract for construction services (Kawerak Contract number 18-C025) for road construction of the Elim Community streets. The contract is a fixed price contract estimated at $9,689,660. In September 2018, a change order was issued in which Kawerak agreed to increase the contract amount by $353,250. In 2019, two additional change orders were issued for $2,081,742 and $171,551, increasing the contact to $12,296,203. As of December 31, 2019, and 2018, respectively, $5,789,891 and $6,476,665 was expensed. The project was completed by the end of 2019. The contract funding is through Kawerak’s Tribal Transportation Program Funds (Kawerak Fund 320). In May 2019, Kawerak publicly advertised the project and awarded Tumet the contract (Kawerak Contract number 19-C052) for maintenance work in Solomon. The contract is a fixed price contract estimated at $29,604. As of December 31, 2019, $29,604 was expensed. The project was completed in 2019. The contract funding is through Kawerak’s Tribal Transportation Program Funds (Kawerak Fund 320). -16- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 8. RELATED PARTY TRANSACTIONS, CONTINUED Tumet Industries, LLC, Continued In October 2019, Kawerak publicly advertised the project and awarded Tumet the contract (Kawerak Contract number 19-C058) for the Stebbins Airport Dust Control Application. The contract is a fixed price contract estimated at $50,000. As of December 31, 2019, $29,604 was expensed. The project was completed in 2019. The contract funding is through Kawerak’s Tribal Transportation Program Funds (Kawerak Fund 320). In November 2019, Kawerak publicly advertised the project and awarded Tumet the contract (Kawerak Contract number 19-C067) for Elim Moses Point Emergency Repairs Project. The contract is a fixed price contract estimated at $122,656. As of December 31, 2019, $122,656 was expensed. The project was completed in 2019. The contract funding is through Kawerak’s Tribal Transportation Program Funds (Kawerak Fund 320). Unaatuq, LLC On April 1, 2010, Kawerak, along with six other entities, signed an operating agreement and formed Unaatuq, LLC (Unaatuq). The primary purpose of forming Unaatuq was for the acquisition of the Pilgrim Hot Springs property. The members and their percentage ownership are as follows: Kawerak (23.08 percent); Bering Strait Native Corporation (23.08 percent); Mary’s Igloo Native Corporation (2.56 percent); Norton Sound Economic Development Corporation (23.08 percent); Sitnasuak Native Corporation (23.08 percent); Teller Native Corporation (2.56 percent); and White Mountain Native Corporation (2.56 percent). The total initial capital contribution from all entities was $1.95 million, which was used to cover the purchase of the property. Kawerak’s initial capital contribution was $450,000, additional contributions were made as follow: 2019 - $46,621; 2018 - $23,450; 2017 - $46,160; 2016 - $23,080; 2015 - $-0-; 2014 - $23,080; and 2013 - $23,080. Kawerak’s proportional share of Unaatuq’s unaudited net loss for the year ended December 31, 2019, and 2018 was ($13,311) and ($45,162), respectively. Kawerak’s proportional share of Unaatuq’s net loss for the year ended December 31, 2017 of ($27,838) was recorded on Kawerak’s books in 2018 as Unaatuq’s financial information for the year ended December 31, 2017, was not available by the date Kawerak’s 2017 financial statements were issued. Member Tribes Kawerak received federal funding through its BIA Compact and its 477 EET funding that it passed through to Member Tribes for Tribal Family Services, office support for village government offices, BIA roads maintenance, Johnson O’Malley funds, grant writer contracts, development coordinator, village facility, and after school activities. During 2019 and 2018, Kawerak passed through the following amounts: -17- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 8. RELATED PARTY TRANSACTIONS, CONTINUED Member Tribes, Continued Subrecipient 2019 2018 Native Village of Brevig Mission $74,195 74,195 Native Village of Council 74,195 84,725 Native Village of Diomede (aka Inalik)74,195 74,195 Native Village of Elim 132,455 129,783 Native Village of Gambell 94,195 94,195 Chinik Eskimo Community (Golovin)79,781 82,037 King Island Native Community 79,195 74,195 Native Village of Koyuk 74,195 74,195 Native Village of Mary's Igloo 74,195 76,451 Native Village of Savoonga 91,161 91,161 Native Village of Shaktoolik 79,195 74,195 Native Village of Shishmaref 74,195 76,667 Village of Solomon 109,982 109,982 Native Village of St. Michael 111,958 118,165 Stebbins Community Association 115,455 110,455 Native Village of Teller 84,600 86,856 Native Village of Unalakleet 41,382 44,001 Native Village of Wales 108,406 108,406 Native Village of White Mountain 85,402 74,195 Nome Eskimo Community 5,000 - Bering Strait School District (see below)52,656 52,656 Nome Public Schools (see below)10,530 - $1,726,523 1,710,710 Bering Strait School District received Johnson O’Malley funds directly from Kawerak on behalf of Native Village of Brevig Mission, Native Village of Diomede (aka Inalik), Native Village of Koyuk, Native Village of Shaktoolik and Native Village of Shishmaref. Nome Public schools received Johnson O’Malley funds directly from Kawerak on behalf of Native Village of Council, King Island Native Community and Village of Solomon. Kawerak also leases office space and facilities from Member Tribes. (See Note 13). -18- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 8. RELATED PARTY TRANSACTIONS, CONTINUED Member Tribes, Continued In 2016, Kawerak received the Ramah settlement and the board of directors passed through $3.3 million to Member Tribes. In 2018, additional funds were passed through for Development Coordinators. In 2019 and 2018, respectively, the following amounts were passed through: Subrecipient 2019 2018 Native Village of Brevig Mission $- 10,000 Native Village of Council - 10,000 Native Village of Diomede (aka Inalik)- 10,000 Native Village of Elim - 10,000 Native Village of Gambell - 10,000 Chinik Eskimo Community (Golovin)- 10,000 King Island Native Community - 10,000 Native Village of Koyuk - 10,000 Native Village of Mary's Igloo - 10,000 Native Village of Savoonga - 10,000 Native Village of Shaktoolik - 10,000 Native Village of Shishmaref - 10,000 Village of Solomon - 10,000 Native Village of St. Michael - 10,000 Stebbins Community Association - 10,000 Native Village of Teller - 10,000 Native Village of Unalakleet - 10,000 Native Village of Wales - 10,000 Native Village of White Mountain - 10,000 $- 190,000 These amounts are included in the statements of functional expenses as pass-through programs at $1,749,592 and $1,920,710, and other program support at $30,000 and $-0-, for the years ended December 31, 2019 and 2018, respectively. -19- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 9. DEFERRED REVENUE Deferred revenue at December 31, 2019 and 2018 consists of the following: Granting Agency 2019 2018 The PEW Charitable Trust $- 16,365 Margaret A. Cargill Foundation 68,719 22,367 W.K. Kellogg Foundation - 27,794 Alaska Community Foundation 10,607 - Norton Sound Health Corporation 45,000 - Walmart - 16,985 Oak Foundation 162,077 258,802 Moore Foundation 514,576 266,269 First People's Fund 5,273 12,430 Ocean Concervancy - 19,287 The Ciri Foundation - 9,764 Federal Department of Transportation 11,080,981 10,745,596 Federal Department of Interior 4,577,277 4,129,660 Alaska Department of Health and Social Services 510,958 688,630 Alaska Department of Public Safety 61,907 261,788 $17,037,375 16,475,737 -20- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 10. LONG-TERM DEBT Long-term debt at December 31, 2019 and 2018 consists of the following: 2019 2018 Note payable to Wells Fargo Bank,NA,secured by real property, requiring fixed monthly principal payments of $3,333 plus interest at a variable interest rate,and maturing August 2021.The interest rate in effect at December 31,2019 and 2018,respectively,was 3.75 and 3.94 percent.The carrying value of the real property securing the note is $146,295 at December 31, 2019.$66,668 106,668 Note payable to Wells Fargo Bank,NA,secured by real property,requiring fixed monthly principal payments of $6,000 plus interest at 70 percent of prime (adjusted quarterly),and maturing in 2029.The interest rate in effect at December 31,2019 and 2018, respectively,was 3.50 and 3.68 percent.The carrying value of the real property securing the note is $992,734 at December 31, 2019.690,000 762,000 756,668 868,668 Less current portion (112,000) (112,000) $644,668 756,668 Maturities of long-term debt for the five years subsequent to 2019 are 2020 - $112,000; 2021 - $98,668; 2022 - $72,000; 2023 - $72,000; and 2024 - $72,000. The fair value of the long-term debt as described above is approximately the same as its carrying value based on borrowing rates currently available to Kawerak, Inc. with similar terms and average maturities. -21- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 11. NET ASSETS Net assets at December 31, 2019 and 2018, consist of the following: 2019 2018 Net assets without donor restrictions Undesignated $6,897,635 6,415,370 Board-designated Investments 8,396,199 7,339,490 Board-designated Cultural Center - 68,569 Net investment in property and equipment 10,982,708 10,499,159 Total net assets without donor restrictions 26,276,542 24,322,588 Net assets with donor restrictions Subject to expenditure for specified purpose: Cultural Center activities 21,086 28,289 Cultural Center Education Tax Credit 10,657 110,403 Environmental programs 6,596 1,596 Eskimo Walrus Commission activities 33,172 37,063 Transportation programs 11,759 11,759 VPSO Programs 200 - Children and Family Services programs 102,179 - Education programs 13,434 13,234 Total net assets with donor restrictions 199,083 202,344 Total net assets $26,475,625 24,524,932 12. INCOME TAXES The provision for income tax (expense) benefit consists of the following components: 2019 2018 Current Federal $(1,616) (121,413) State (1,578) (38,515) (3,194) (159,928) Deferred Federal 7,713 179,769 State 3,811 5,536 11,524 185,305 $8,330 25,377 -22- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 12. INCOME TAXES, CONTINUED Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to Tumet’s depreciable assets (using accelerated depreciation methods for income tax purposes). The Company’s provision for income taxes differs from applying the statutory U.S. federal income rate to income before income taxes. The primary differences result from providing for state income taxes and from deducting certain expenses for financial statement purposes but not for federal income tax purposes. 13. LEASES The Corporation has entered into various operating leases with related and non-related entities for office facilities and space in Nome and around the surrounding region. The leasing arrangements are summarized as follows: Leases with Member Tribes Kawerak leases office space for the Tribal Coordinators, village-based Kawerak employees, in 19 offices. These leases have an annual calendar year-end expiration date and require an annual sum of $10,000 for each lease. These leases are renewed annually. Kawerak leases office space for ICWA/Welfare Assistance Tribal Family Coordinators, Village Transportation Planners, and the Accounting Specialist, all village-based Kawerak employees, in 14 offices. These leases have various terms, are generally renewed annually, and require monthly lease payments that range in 2019 and 2018 from $300 to $750, and from $250 to $750 per month, respectively. Kawerak leases office space for two of its village Head Start programs from Member Tribes. These leases have various terms and are renewed annually. In 2019 and 2018, the monthly lease payments were from $975 to $1,000, and from $850 to $1,000, respectively. In 2017, Kawerak started leasing office space for a Family Liaison office from a Member Tribe. The monthly lease payment in 2018 was $500. This lease was not renewed in 2019. Leases with related entities In 2018, Kawerak started leasing facility space from a related entity to temporally locate its Day Care Center and Nome based Head Start program. The lease commenced on March 26, 2018 and ends on or before March 25, 2021, unless terminated earlier. The rent is $78,000 upon the execution of the lease and no additional rent shall be assessed during the lease period. Kawerak terminated this lease and moved to the newly renovated facility in the summer of 2019. (See Note 5) -23- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 13. LEASES, CONTINUED Leases with non-related entities Kawerak leases office space for ICWA/Welfare Assistance Tribal Family Coordinators, all village-based Kawerak employees, from non-related entities. These leases are renewed annually and required monthly rental payments that range in 2019 from $410 to $500. The monthly lease payments in 2018 were from $200 to $500. Kawerak leases office space for two of its village Head Start programs from non-related entities. These leases have various terms and are renewed annually. In 2019 and 2018, the monthly lease payments were from $950 to $4,267 per month. Kawerak leases office space in Shishmaref from a non-related entity for the Inupiaq Language Revitalization program. In 2018, the lease requires monthly payments of $25 and in lieu of paying full rent of $1,000 per month, Kawerak agreed to do some renovations to the leased space. The renovations for $86,800 were finished at the end of 2017. The lease is for six years commencing on January 1, 2018 and ending on December 31, 2023. In 2019, the monthly lease payments were $25 per month. In 2016, Kawerak started leasing space from a non-related entity for the Katirvik Cultural Center under a long-term operating lease. The lease is for ten years commencing on May 1, 2016 and can be renewed for five additional years. The lease requires monthly lease payments of $10,042 per month. In April 2018, Kawerak started leasing space from a non-related entity for the Wellness Program. The lease ended on June 30, 2019, and was renewed for one additional year. The lease requires monthly lease payments of $2,299 per month. Total amount of rent expense included in the statement of activities for the years ended December 31, 2019 and 2018, respectively, is $518,200 and $527,705, including $295,150 and $308,427 paid to related Member Tribes/entities and $223,050 and $219,278 paid to non-related entities. The total estimated rental commitments for the next five years are: 2020 - $505,573; 2021 - $120,800; 2022 - $120,800; 2023 - $120,800; and 2024 - $120,500. 14. RETIREMENT PLAN On October 1, 1988, Kawerak, Inc. established the Kawerak, Inc. Retirement Plan; a defined contribution plan intended to qualify as a profit-sharing plan under ERISA and a tax-exempt trust under IRC Section 401. The Plan allows for employer contributions to be determined annually, subject to approval of the board of directors. Employer contributions during 2019 and 2018 were $776,055 and $827,426, respectively. -24- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 15. FAIR VALUE MEASURMENTS The only assets currently reported at fair value in the Corporation’s financial statements are the marketable securities, which are measured on a recurring basis. The Corporation has no liabilities carried at fair value. Fair values of the marketable securities as of December 31, 2019 and 2018, respectively, are as follows: Level 1 Level 2 Level 3 December 31, 2019 Cash $87,946 - - U.S. treasuries - 1,413,438 - Fixed income 2,483,742 - - Equity funds 3,489,056 - - Alternative investments 922,017 - - Total assets $6,982,761 1,413,438 - December 31, 2018 Cash $102,904 - - U.S. treasuries - 1,501,519 Fixed income 2,166,090 - - Equity funds 2,827,651 - - Alternative investments 741,326 - - Total assets $5,837,971 1,501,519 - Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market. For the Corporation, level 1 financial assets consist of cash, exchange traded funds (ETFs), real estate, and commodities. Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. For the Corporation, level 2 financial assets consist of US Treasuries and US Agencies securities. Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. None of the Corporation marketable securities are level 3 financial assets. -25- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 16. CONTRIBUTED GOODS AND SERVICES The Corporation recognized contributed goods and services for the Head Start program as follows: 2019 2018 Professional services $538,503 732,481 Professional services include dental services, TB screening, physical therapy, speech therapy, music teachers, special education teachers, and fire department safety instruction. During 2019 and 2018, Kawerak also received contributed services, in the amount of $28,798 and $47,953, respectively that does not meet the criteria for recognition as described in Note 1. 17. CONTINGENCIES, RISKS, AND GUARANTEES Kawerak participates in a number of federal and state grant programs that are subject to audit by the grantors or their representatives. Such audits could lead to request for reimbursement to the grantor agency for expenditures disallowed under terms of the grant. No provision has been made for any liabilities that may arise from such audits since the amounts, if any, cannot be determined at this time. Contract Support Costs On December 14, 2012, Kawerak submitted a claim to the Department of the Interior (Department) under the Contract Disputes Act alleging that the Department breached its compact and funding agreement with Kawerak in FY 2006 by failing to pay the full “contract support costs” mandated by the Indian Self-Determination and Education Assistance Act, 25 U.S.C. 450 et seq. The claim requests payment of $1,124,022 plus interest. The Department responded with a letter stating that the claim may be part of a pending class action, Ramah Navajo Chapter v. Jewell, in the U.S. District Court for the District of New Mexico, so the Department would “administratively stay” the claim pending possible settlement of the class litigation or further guidance from the court. In 2015, Kawerak was notified that the litigants in the Ramah matter reached a settlement that will settle all claims. In early 2016, the judge in the Ramah matter approved the class settlement. Kawerak’s individual 2006 claim has remained part of the Ramah class action and was resolved through the class action settlement. In November 2016, Kawerak received $15,497,231 plus interest as a result of the class action lawsuit. In July 2018, Kawerak received the second and final payment from the lawsuit in the amount of $67,346. Risk of Loss Kawerak is exposed to various risks of loss related to theft of, damage to and destruction of assets, third party liability, errors and omissions and natural disasters for which Kawerak carries commercial insurance. Claims on insurance have not exceeded coverage limits in previous years. Services performed under Kawerak’s Annual Funding Agreement with the Department of the Interior are covered for injuries to persons or property damage under the Federal Tort Claims Act. -26- KAWERAK, INC. NOTES TO FINANCIAL STATEMENTS, CONTINUED Year ended December 31, 2019 17. CONTINGENCIES, RISKS, AND GUARANTEES, CONTINUED Financial Instruments Financial instruments that potentially subject Kawerak to credit risk consist principally of cash and cash equivalents, receivables, and marketable securities. Kawerak maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. To mitigate risk of loss, Kawerak has entered into a tri-party collateral agreement. (See Note 3) Kawerak has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to these accounts. Credit risk for accounts receivable is concentrated as well because substantially all of the balances are receivable from the federal government and State of Alaska. The marketable securities invested in United States government and agency securities are guaranteed by the United States government or United States agencies and are considered risk free. The marketable securities invested in United States government sponsored enterprises are not guaranteed by the United States government, but have a low credit risk. All of the Corporation’s marketable securities invested in fixed income are considered to have interest rate risk. The marketable securities invested in equities are considered to have market risk; in some cases, a portion of these securities may also be subject to foreign securities risk, currency risk, and small- cap securities risk. All of the marketable securities are considered to have liquidity risk. Loan Guaranty In September 2010, Kawerak signed a continuing loan guaranty with Wells Fargo Equipment Finance, Inc. (Wells Fargo) on behalf of Tumet; Tumet negotiated a revolving line of credit in the amount of $1 million (See Note 8). It is not anticipated that any loss will result from this agreement. 18. SUBSEQUENT EVENTS As a result of the COVID-19 global pandemic, on March 18, 2020, Kawerak closed its facilities to protect the health of its employees. The majority of executive, supervisory, and office workers transitioned from working at the office to working from home in line with Federal guidance and State mandates for social distancing and “hunkering down”. The majority of service providing employees transitioned to providing services electronically from home, such as, but not limited to, those paid by the Head Start/Early Head Start Partnership programs. Guidance was obtained from numerous Federal granting agencies allowing employees to be paid their regularly scheduled wages and benefits. On April 6, 2020, Kawerak applied for the Paycheck Protection Program (PPP) Small Business Administration Loan- Title 1 of the Coronavirus Aid, Relief and Economic Security (CARES) Act through KeyBank, N.A. On April 22, 2020, $3,142,152 was received as a PPP Loan. Based on United States Treasury advice after the application was filed, Kawerak chose to return the PPP Loan funds on May 18, 2020. With the advent of two COVID-19 cases in Nome, Alaska in May of 2020, the majority of Kawerak employees will continue working from home indefinitely. -27- SUPPLEMENTARY INFORMATION -28- KOHLER, SCHMITT & HUTCHISON A Professional Corporation Certified Public Accountants 714 4th Avenue, Suite 303 • (907) 456-6676 • Fax 456-6431 P.O. Box 70607, Fairbanks, Alaska 99707-0607 • ksh@kshcpa.com INDEPENDENT AUDITOR’S REPORT ON SUPPLEMENTARY INFORMATION Board of Directors Kawerak, Inc. We have audited the financial statements of Kawerak, Inc. as of and for the years ended December 31, 2019 and 2018, and our report thereon dated May 26, 2020, which expressed an unmodified opinion on those financial statements, appears on page 1. Our audit was performed for the purpose of forming an opinion on the financial statements as a whole. The supplementary information on pages 30 through 59 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. May 26, 2020 Fairbanks, Alaska -29- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES EDUCATION & EMPLOYMENT SUPPORTIVE SERVICES Year ended December 31, 2019 Page 1 of 6 115-00 123-19 133-18 140-19 160-18 160-19 Ramah -Rasmuson Foundation Caleb Pungowiyi NSEDC EHS-CC EHS-CC Special Projects Head Start Building Scholarship Course Partnership Wrap Partnership Wrap EESS Renovation Program Work Around Service Around Service REVENUES Grant revenue $- - - - - 4,926 Contributions - - 800 - - - Investment income - - - - - - Other - 88,397 152,083 10,517 - 72,707 Total revenues - 88,397 152,883 10,517 - 77,633 EXPENSES Personnel services - - 25,380 - - 46,325 Professional services - - - - - - Travel and per diem 3,864 - 5,996 10,517 - - Supplies - - 45 - - 989 Equipment - - 1,431 - - - Vehicle expense - - - - - 141 Contractual services 50,000 - 5,879 - - - Facilities expense - 88,397 (2) - - - Insurance expense - - - - - - Pass-through programs - - - - - - Depreciation expense - - - - - - Interest expense - - - - - - Building costs - - - - - 425 Adult vocational training - - - - - - Direct employment - - - - - - Other programs support - - 89,845 - - 3,620 Scholarships, awards and donations - - - - - - Training and tuition - - - - - 119 Grant entitlement - - - - - - Board administration and fees - - - - - - Other operating expenses - - 4,368 - - (3,704) Total direct expense 53,864 88,397 132,942 10,517 - 47,915 Allocation of indirect expense 16,170 - 19,941 - - 11,203 Total expenses 70,034 88,397 152,883 10,517 - 59,118 Excess of revenues over expenses (70,034) - - - - 18,515 NET ASSETS, January 1, 2019 - - - - 31,363 (18,515) TRANSFERS 70,034 - - - - - NET ASSETS, December 31, 2019 $- - - - 31,363 - See Independent Auditor's Report on Supplementary Information -30- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES EDUCATION & EMPLOYMENT SUPPORTIVE SERVICES Year ended December 31, 2019 Page 2 of 6 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 See Independent Auditor's Report on Supplementary Information 160-20 164-19 173-19 175-19 185-19 220-19 EHS-CC NSEDC W.K. Kellogg Foundation ACF NSEDC Partnership Wrap Adult Basic Education Language Advancing Vocational Growing Our 477 Around Service Support Revitalization Trades Own Teachers EESS $2,375 - - - - 2,223,829 - - - - - - - - - - - - 33,101 50,000 329,409 15,793 8,907 - 35,476 50,000 329,409 15,793 8,907 2,223,829 30,747 20,011 221,565 - - 596,519 - - - - - - - 19,744 21,654 - 2,092 84,435 410 10,245 11,141 - - 7,621 - - - - - 27,100 3 - 636 - - - - - - - 2,000 162,467 - - 2,870 - - 4,126 - - 2,280 - - - - - - - - - - - - - - - - - - - - - - - 7,082 - - - - - - 14,357 - 697 - - - - - 6,243 1,056 - 6,008 - - 391,162 - - - - - 280,715 - - 18,874 - 4,815 9,723 - - - - - - - - - - - - (1,154) - - - - 8,145 31,062 50,000 292,110 14,357 8,907 1,578,953 7,302 - 37,299 1,436 - 644,876 38,364 50,000 329,409 15,793 8,907 2,223,829 (2,888) - - - - - - - - - - - - - - - - - $(2,888) - - - - - -31- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES EDUCATION & EMPLOYMENT SUPPORTIVE SERVICES Year ended December 31, 2019 Page 3 of 6 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 See Independent Auditor's Report on Supplementary Information 221-18 221-19 226-19 226-20 280-19 280-20 Head Head Voc Rehab Voc Rehab Early Head Start Early Head Start Start Start Services Services Child Care Child Care Program Program Project Project Partnership Partnership $378,252 3,101,321 306,868 107,544 1,714,558 252,534 - - - - - - - - - - - - - - - - 199,779 120,524 378,252 3,101,321 306,868 107,544 1,914,337 373,058 267,008 2,097,676 173,328 58,328 540,794 283,835 6,464 40,877 - - - - 17,829 59,809 15,310 3,771 2,142 - 9,209 93,875 1,313 4,411 36,092 6,417 - 1,774 - - 291 70 - 4,846 3,558 - 1,419 32 - - - - - - 4,166 180,028 718 246 1,126,492 22,417 - 50,783 632 - 11,294 - - - - - - - - - - - - - - - - - - - 13,872 53,999 - - 2,172 7,093 - - - - - - - - - - - - 13,766 91,267 39,343 14,531 46,593 19,686 - - - - - - - 27,999 3,314 1,300 2,688 1,276 - - - - - - - - - - - - - 5,422 - - 1,307 330 332,314 2,708,355 237,516 82,587 1,771,284 341,156 45,938 392,966 69,352 24,957 143,053 31,902 378,252 3,101,321 306,868 107,544 1,914,337 373,058 - - - - - - - - - - - - - - - - - - $- - - - - - -32- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES EDUCATION & EMPLOYMENT SUPPORTIVE SERVICES Year ended December 31, 2019 Page 4 of 6 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 See Independent Auditor's Report on Supplementary Information 292-19 292-20 298-19 298-20 335-19 353-19 ANEP ANEP DOE-Kawerak DOE-Kawerak BIA Compact BIA Compact Bering Strait Regional Bering Strait Regional Aviation Aviation FY18 Carryover -Welfare ABE Program ABE Program Project Project EESS Division Assistance $229,927 47,983 421,972 35,058 138,487 614,639 - - - - - - - - - - - - - - - - - - 229,927 47,983 421,972 35,058 138,487 614,639 79,995 21,463 8,769 - 1,989 119,673 - - - - - - 45,652 10,245 2,578 - - 14,132 26,821 1 - - - 1,300 - - 204,628 - - - - - - - - - 18,000 - 186,959 35,058 - 4,288 3,289 3,489 - - - 53 1,278 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,000 130,729 - - - - - - 2,384 1,605 - - - 33 - - - - 78,750 - - - - - - - - - - - - 101,445 - - - - - - - - - - - - 177,419 36,803 402,934 35,058 83,739 371,653 52,508 11,180 19,038 54,748 242,986 229,927 47,983 421,972 35,058 138,487 614,639 - - - - - - - - - - - - - - - - - - $- - - - - - -33- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES EDUCATION & EMPLOYMENT SUPPORTIVE SERVICES Year ended December 31, 2019 Page 5 of 6 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 See Independent Auditor's Report on Supplementary Information 466-19 466-20 468-19 468-20 469-19 469-20 Adult Basic Adult Basic Regional Regional Head Head Education Education ABE/GED ABE/GED Start Start Program Program Program Program Program Program $134,974 48,016 - - 326,900 235,041 - - - - - - - - - - - - - - 105,157 60,555 - - 134,974 48,016 105,157 60,555 326,900 235,041 122,109 44,214 71,849 47,954 144,605 150,296 - - - - - - 2,859 - 19,006 4,608 27,198 23,669 - 245 648 95 8,660 2,582 - - - - 444 - - - - - 14 14 - - - - - - - - - - 58,794 23,250 - - - - 3,985 - - - - - - - - - - - - - - - - - - - - - - - 37,218 2,348 - - - - - - - - - - - - - - - - - 35 - - - - - - - - - - 1,970 226 - - - - - - - - - - - - - - - - 1,373 1,963 124,968 44,459 91,503 52,657 284,261 204,383 10,006 3,557 13,654 7,898 42,639 30,658 134,974 48,016 105,157 60,555 326,900 235,041 - - - - - - - - - - - - - - - - - - $- - - - - - -34- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES EDUCATION & EMPLOYMENT SUPPORTIVE SERVICES Year ended December 31, 2019 Page 6 of 6 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 See Independent Auditor's Report on Supplementary Information 486-19 486-20 910-00 928-00 Native Native EET SOA - ATAP Employment Work Employment Work Donation Graduate Service Service Fund Incentive Bonus Total $125,708 54,278 - - 10,505,190 - - 200 - 1,000 - - - - - - - - 7,000 1,253,929 125,708 54,278 200 7,000 11,760,119 94,979 40,619 - - 5,310,030 - - - - 47,341 1,515 - - - 398,625 666 170 - - 222,956 - - - - 235,738 - - - - 10,663 - - - - 464,651 86 893 - - 1,519,312 - - - - 70,252 - - - - - - - - - - - - - - - - - - - 124,209 - - - - 148,783 - - - - 6,243 - - - - 720,934 - - - - 359,465 - - - - 72,304 - - - - 101,445 - - - - - - - - - 18,050 97,246 41,682 - - 9,831,001 28,462 12,596 - - 1,976,325 125,708 54,278 - - 11,807,326 - - 200 7,000 (47,207) - - 11,856 - 24,704 - - - - 70,034 $- - 12,056 7,000 47,531 -35- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES COMMUNITY SERVICES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 1 of 7 114-00 126-19 126-20 158-18 158-19 186-19 187-19 231-19 CIRI Foundation Ramah -First People's First People's NSEDC Increased Safe Community Moore Moore Native Arts Native Arts BHS - MSPI Alaska Native & Stable Services Foundation Foundation Economy Economy Camp Support Art & Culture Families REVENUES Grant revenue $- - - - - - - 34,534 Contributions - - - - - - - - Investment income - - - - - - - - Other - 122,792 48,252 12,430 14,727 70,000 9,764 - Total revenues - 122,792 48,252 12,430 14,727 70,000 9,764 34,534 EXPENSES Personnel services - 50,941 27,049 1,671 - 5,938 - - Professional services - - - - - - - - Travel and per diem 7,649 28,867 2,224 4,833 - 37,461 - 3,470 Supplies 28,562 895 - 413 - 10,771 976 2,068 Equipment - - - - - - - - Vehicle expense - - - - - - - - Contractual services 15,153 32,000 15,320 - 13,388 2,100 6,300 - Facilities expense - - - - - - - 21,181 Insurance expense - - - - - - - - Pass-through programs - - - - - - - - Depreciation expense - - - - - - - - Interest expense - - - - - - - - Building costs - - - - - - - - Adult vocational training - - - - - - - - Direct employment - - - - - - - - Other programs support - - - - - - Scholarships, awards and donations - - - - - - - - Training and tuition - - - 2,700 - - - Grant entitlement - - - - - - - - Board administration and fees - - - - - - - - Other operating expenses 2,500 - - - - - 1,600 - Total direct expense 53,864 112,703 44,593 9,617 13,388 56,270 8,876 26,719 Allocation of indirect expense 16,170 10,089 3,659 2,813 1,339 13,730 888 7,815 Total expenses 70,034 122,792 48,252 12,430 14,727 70,000 9,764 34,534 Excess of revenues over expenses (70,034) - - - - - - - NET ASSETS, January 1, 2019 - - - - - - - - TRANSFERS 70,034 - - - - - - - NET ASSETS, December 31, 2019 $- - - - - - - - -36- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES COMMUNITY SERVICES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 2 of 7 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 231-20 232-19 232-20 234-19 237-17 247-20 254-22 255-21 Denali Safe Child Child EDA EDA Commission OVC - Tribal CTAS & Stable Welfare Welfare Business Technical Assistance Golovin Set Aside Tribal Victim Families Services Services Plan Planning Subdivision Design Program Assistance $16,705 26,504 7,950 70,000 162,248 28,488 13,335 140,668 - - - - - - - - - - - - - - - - - - - - - - - - 16,705 26,504 7,950 70,000 162,248 28,488 13,335 140,668 - - - 46,603 97,931 - - 55,852 - - - - - - - - - 8,398 3,769 5,561 24,361 - 5,276 25,910 - 395 590 1,591 2,495 - 4,689 15,701 - - - - - - - - - - - - - - - 2,438 - - - - - 28,488 414 - 12,828 15,272 2,868 - - - - 1,600 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 487 - - - - - - - - - 30 - - - - 3,911 - - - - - - - - - - - - - - - - - - - - - - - 2,935 12,828 24,095 7,227 53,755 124,787 28,488 10,379 108,834 3,877 2,409 723 16,245 37,461 - 2,956 31,834 16,705 26,504 7,950 70,000 162,248 28,488 13,335 140,668 - - - - - - - - - - - - - - - - - - - - - - - - $- - - - - - - - -37- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES COMMUNITY SERVICES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 3 of 7 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 267-19 267-20 273-21 279-19 282-18 294-19 294-20 296-20 USDA Northwest Alaska Northwest Alaska Youth BSRHA - 2019 CTAS Bering Straits Bering Straits Technical Wellness Wellness Initiative Foster Family Safe Home Safe Homes and Safe Homes and Assistance and Initiative Initiative Program Event Representative Education Project Education Project Training $679,410 152,714 24,047 10,000 166,131 188,884 55,854 1,545 - - - - - - - - - - - - - - - - - - - - - - - - 679,410 152,714 24,047 10,000 166,131 188,884 55,854 1,545 92,227 38,480 2,312 - 70,702 76,891 32,045 1,101 - - - - - - - - 78,125 39,225 8,695 9,900 25,998 27,245 518 60 57,462 5,832 7,527 100 4,629 8,077 358 25 1,030 - - - 1,408 - - - - - - - - - - - 384,871 50,181 - - 23,240 39,758 11,638 - 10,543 3,440 797 - 10,259 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 89 140 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 624,258 137,158 19,331 10,000 136,236 152,060 44,699 1,186 55,152 15,556 4,716 - 29,895 36,824 11,155 359 679,410 152,714 24,047 10,000 166,131 188,884 55,854 1,545 - - - - - - - - - - - - - - - - - - - - - - - - $- - - - - - - - -38- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES COMMUNITY SERVICES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 4 of 7 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 320-19 320-20 325-19 325-20 334-19 336-19 351-19 354-19 BIA Compact BIA Compact BIA Compact Federal Federal Savoonga Savoonga FY18 Carryover -FY18 Carryover -Community Roads Roads Transportation Transportation Community Tribal Affairs BIA Compact Services Program Program Funds Funds Services Division Real ID Project ICWA Division $8,106,399 1,567,736 34,313 7,830 103,483 295,051 2,016,785 927,795 - - - - - - - - - - - - - - - - - - - - - - - - 8,106,399 1,567,736 34,313 7,830 103,483 295,051 2,016,785 927,795 276,030 96,152 - - - - 1,216,984 503,541 757,499 151,696 14,573 2,440 - - - - 125,173 24,190 5,741 - 24,195 13,641 - 17,417 4,721 683 - - 33,374 69,649 36 37,406 - 72,418 - 4,203 - 95,068 - - 6,567 3,847 - - - - - - 5,899,290 976,962 5,862 - - - - 1,400 332 - - 104 - 2,465 833 40,324 2,660 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 29,440 35,936 1,202 23 25 50 - 791 - - - - - - - - - - - - 4,875 - - - - - - - - - - - - - - - - - - - 7,773 3,246 - - - - - 1,020 7,148,217 1,368,122 27,378 6,666 62,573 178,408 1,219,485 561,008 958,182 199,614 6,935 1,164 40,910 116,643 797,300 366,787 8,106,399 1,567,736 34,313 7,830 103,483 295,051 2,016,785 927,795 - - - - - - - - - - - - - - - - - - - - - - - - $- - - - - - - - -39- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES COMMUNITY SERVICES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 5 of 7 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 375-00 460-19 460-20 462-19 462-20 465-19 465-20 Rural Rural BIA Compact Child Welfare Child Welfare Special Projects OCS Compact OCS Compact Services Services VPSO VPSO Savoonga Housing Program Program Program Program Program Program $356,048 - - 152,717 115,676 477,927 499,314 - - - - - - - - - - - - - - - 79,165 52,178 - - - - 356,048 79,165 52,178 152,717 115,676 477,927 499,314 - 56,618 35,046 68,496 65,030 309,411 353,932 - - - - - - - - 4,040 4,650 32,125 11,570 22,529 14,232 - 589 373 8,993 8,093 12,695 2,110 - - - - - - - - - - - 53 4,182 2,972 228,033 - - - - - - - - - 117 3,835 7,758 8,728 - - - 1,800 - 4,171 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 6,604 250 896 1,465 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 8,080 - 228,033 61,247 40,069 118,135 88,831 369,722 383,439 128,015 17,918 12,109 34,582 26,845 108,205 115,875 356,048 79,165 52,178 152,717 115,676 477,927 499,314 - - - - - - - - - - - - - - - - - - - - - $- - - - - - - -40- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES COMMUNITY SERVICES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 6 of 7 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 472-19 472-20 478-17 478-18 487-19 487-20 490-19 Designated Designated Children's Children's Title 4E Title 4E Legislative Legislative Behavioral Advocacy Advocacy Reimbursement Reimbursement Grant Grant Health & Early Centers Centers Fund Fund Program Program Intervention $93,005 76,778 - - 98,743 97,898 72,384 - - 1,000 - - - - - - - - - - - - - 239,495 44,698 - - 4,500 93,005 76,778 240,495 44,698 98,743 97,898 76,884 71,196 58,117 28,078 - - - 21,817 - - - - - - - - - 19,659 13,607 - - 442 867 829 23,115 4,193 - - 8,736 - - 1,376 1,064 - - 1,030 - - 1,583 320 - - - - - - - 94,041 93,236 27,043 10 14 69,058 14,392 - - 6,012 - - 6,635 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2,556 70 - - - - - - - - - - - 858 2,134 - - - - - 29,615 (2,033) - - - - - - - - - - 225 - 2,435 631 - - - 72,298 58,960 184,968 34,378 94,041 93,236 65,080 20,707 17,818 55,527 10,320 4,702 4,662 11,804 93,005 76,778 240,495 44,698 98,743 97,898 76,884 - - - - - - - - - - - - - - - - - - - - - $- - - - - - - -41- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES COMMUNITY SERVICES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 7 of 7 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 490-20 906-00 907-19 918-00 922-00 923-19 Behavioral KTP Community VPSO BSSD IPEC Health & Early Miscellaneous Planning &Miscellaneous Case Settlement -Igaliq Camps Intervention Income Development Funds CAC Donation Total $88,183 - - - - - 16,967,082 - - 1,300 200 100,000 1,250 103,750 - - - - - - - - 2,219 - 1,390 - - 701,610 88,183 2,219 1,300 1,590 100,000 1,250 17,772,442 44,752 - - - - - 3,804,943 - - - - - - 926,208 1,072 - - - - - 681,828 3,531 - 504 - - 1,250 374,903 - - - - - - 177,597 - - - - - - 21,962 16,500 - - - - - 7,963,818 6,942 - - - - - 200,788 - - - - - - 55,590 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 80,024 - - - - - - - - - - - - - 14,508 - - - - - - 27,582 - - - - - - - - - 796 - - - 31,241 72,797 - 1,300 - - 1,250 14,360,992 15,386 - - - - - 3,377,675 88,183 - 1,300 - - 1,250 17,738,667 - 2,219 - 1,590 100,000 - 33,775 - 11,759 - 3,594 - - 15,353 - - - - - - 70,034 $- 13,978 - 5,184 100,000 - 119,162 -42- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES NATURAL RESOURCES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 1 of 5 113-00 119-19 125-20 136-19 145-19 148-20 149-19 159-18 165-18 OAK - EWC UAA Ramah -American Honor the Earth -Zender Contract -Auke Bay OAK Collaborative Stewardship,Alaska Native Natural Seafoods Company Food Security Backhaul Activity Labratories -Marine Program -Research with ICC Collaboration &Science & Engineering Resources LMS AFN Support Program Program NOAA Research Tribal Coordination Program Communication Program REVENUES Grant revenue $- - - - - - 12,989 - - Contributions - - 4,000 - - - - - - Investment income - - - - - - - - - Other - 7,500 - 17,081 20,000 44,643 - 72,913 9,570 Total revenues - 7,500 4,000 17,081 20,000 44,643 12,989 72,913 9,570 EXPENSES Personnel services 8,719 - - 10,549 1,433 35,437 4,443 36,747 6,339 Professional services - - - - - - - - - Travel and per diem 6,474 7,298 - 2,568 6,131 3,848 6,790 18,837 1,983 Supplies 7,682 202 - - 115 43 - 2,576 - Equipment - - - - - - - - - Vehicle expense - - - - - - - - - Contractual services - - - - 10,000 - - 3,920 - Facilities expense - - - - - - - - - Insurance expense - - - - - - - - - Pass-through programs - - - - - - - - - Depreciation expense - - - - - - - - - Interest expense - - - - - - - - - Building costs - - - - - - - - - Adult vocational training - - - - - - - - - Direct employment - - - - - - - - - Other programs support - - - - - - - - - Scholarships, awards and donations - - - - - - - - - Training and tuition - - - - - - - - - Grant entitlement - - - - - - - - - Board administration and fees 4,939 - - - - - 1,350 - - Other operating expenses - - - - - - 1,493 - Total direct expense 27,814 7,500 - 13,117 17,679 39,328 12,583 63,573 8,322 Allocation of indirect expense 8,350 - - 3,964 2,321 5,315 406 9,340 1,248 Total expenses 36,164 7,500 - 17,081 20,000 44,643 12,989 72,913 9,570 Excess of revenues over expenses (36,164) - 4,000 - - - - - - NET ASSETS, January 1, 2019 - - - - - - - - - TRANSFERS 36,164 - - - - - - - - NET ASSETS, December 31, 2019 $- - 4,000 - - - - - - -43- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES NATURAL RESOURCES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 2 of 5 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 170-19 171-19 179-19 180-19 183-18 194-00 203-21 233-19 233-20 PEW Shishmaref Relocation Co-production of PEW - TK Migratory Bird Ramah -Road Planning and Marine Marine Knowledge and Ocean & Fisheries Harvest Walmart Social Science Environmental Mammal Mammal Research Conservancy Management Survey Grant Programs Study Protection Act Protection Act $- - - - - - 10,613 68,636 103,590 - - - - - - - - - - - - - - - - - - 60,885 44,286 16,000 14,728 16,985 - - - - 60,885 44,286 16,000 14,728 16,985 - 10,613 68,636 103,590 32,777 27,681 6,028 5,006 5,315 17,363 - 49,155 51,976 - - - - - - - - - 3,710 1,477 4,601 2,664 9,470 3,432 - 374 3,505 - - - - 706 772 - 2 6 - - - - - - - - - - - - - - - - - - 21,120 6,000 4,272 - - - 9,648 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 125 - - - - - - - - - - - - - - - - - 400 - - - - - - - - - - - - - - - - - - - - - 3,572 24,063 - - - 3,200 - - - - - 57,607 35,158 14,901 11,395 15,491 21,567 9,648 53,103 79,550 3,278 9,128 1,099 3,333 1,494 6,475 965 15,533 24,040 60,885 44,286 16,000 14,728 16,985 28,042 10,613 68,636 103,590 - - - - - (28,042) - - - - - - - - - - - - - - - - - 28,042 - - - $- - - - - - - - - -44- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES NATURAL RESOURCES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 3 of 5 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 238-19 260-17 265-19 265-20 276-14 281-16 285-19 285-20 287-17 DOE USFWS NPS NPS Bering Strait Migratory Beringia EPA EPA NSF EWC Chukotka EPA TRP - EPA TRP - Energy Planning Birds Supernatural Env.IGAP Backhaul IGAP Backhaul Research Collaboration Brownfields Brownfields Network $31,824 31,962 109,688 34,030 3,328 1,278 112,844 50,808 351,627 - - - - - - - - - - - - - - - - - - - - - - - - - - - 31,824 31,962 109,688 34,030 3,328 1,278 112,844 50,808 351,627 3,580 23,900 52,978 18,657 2,553 - 79,254 38,479 79,204 - - - - - - - - - 20,483 - 20,908 4,518 - 1,028 8,058 538 84,280 376 354 10,977 3,154 - - (5) 14,314 - - - - - - - - - - - - - - - - - - - - - - - - - - 107,684 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 699 - - - - - - - - - - - - - - - - - - - 300 - - - - - - 840 24,439 24,554 84,863 26,329 2,553 1,028 87,307 39,017 287,021 7,385 7,408 24,825 7,701 775 250 25,537 11,791 64,606 31,824 31,962 109,688 34,030 3,328 1,278 112,844 50,808 351,627 - - - - - - - - - - - - - - - - - - - - - - - - - - - $- - - - - - - - - -45- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES NATURAL RESOURCES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 4 of 5 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 288-19 297-19 297-20 299-20 333-19 350-19 361-19 365-19 366-00 NSF BIA Compact BIA Compact BIA Compact Alaska Pipeline & Hazardous Pipeline & Hazardous Thru OSU FY18 Carryover -Natural ANCSA BIA Compact BIA Compact Sealife Materials Safety Materials Safety Shishmaref Natural Resources Resources Research Environmental Special Arctic IERP Administration Administration Flooding Division Division Program Program Backhaul Training $18,315 131,772 41,010 7,367 172,678 1,536,147 27,736 82,690 14,470 - - - - - - - - - - - - - - - - - - - - - - - - - - - 18,315 131,772 41,010 7,367 172,678 1,536,147 27,736 82,690 14,470 13,974 64,764 19,129 4,256 65,671 797,161 16,771 42,091 9,437 - - - - - - - - - 112 37,030 3,581 1,401 19,714 24,070 - 2,794 - - 157 8,783 - 11,413 11,367 - 2,820 - - - - - - - - - - - - - - - 171 - - - - - - - 4,800 - - 1,318 - - - - - - 1,982 - - - - - - - - 5,192 - 977 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 64,787 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 14,762 - - - - - - - 2,815 9,367 - - - 14,086 101,951 31,493 5,657 104,413 928,859 16,771 50,000 9,437 4,229 29,821 9,517 1,710 68,265 607,288 10,965 32,690 5,033 18,315 131,772 41,010 7,367 172,678 1,536,147 27,736 82,690 14,470 - - - - - - - - - - - - - - - - - - - - - - - - - - - $- - - - - - - - - -46- KAWERAK, INC. COMBINING STATEMENT OF REVENUES AND EXPENSES NATURAL RESOURCES DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 5 of 5 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 TRANSFERS NET ASSETS, December 31, 2019 368-00 372-00 376-19 903-00 905-00 920-19 924-00 930-20 Eskimo BIA Compact BIA Compact BIA Compact EPA IGAP Walrus NSEDC BSNC Wells Fargo Special Special FY18 Carryover - Donations Commission NR Travel Donations Energy Backhaul Alaska Noxious Weeds SSP Fund Donations Reimbursement for EWC Summit TOTAL $454,473 (2,275) 82,616 - - - - - 3,490,216 - - - - - - 4,000 1,000 9,000 - - - - - - - - - - - - 1,197 - 33,131 - - 358,919 454,473 (2,275) 82,616 1,197 - 33,131 4,000 1,000 3,858,135 - - 13,526 - 2,859 - - - 1,647,212 - - - - - - - - - 8,282 - 16,466 - - 33,005 4,000 - 373,430 506 - 18,683 200 130 - - - 95,333 - (1,995) - - - - - - (1,995) - - - - - - - - 171 287,355 - 1,280 - - - - - 457,397 - - - - - - - - 1,982 - - - - - - - - 6,169 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 64,912 - - - - - - - - - - - - - - - - - 1,099 - - - - - - - - - - - - - - - - - 48,686 - - - - 126 - - 18,141 296,143 (1,995) 49,955 200 2,989 33,131 4,000 - 2,712,537 158,330 (280) 32,661 60 902 - - - 1,207,758 454,473 (2,275) 82,616 260 3,891 33,131 4,000 - 3,920,295 - - - 937 (3,891) - - 1,000 (62,160) - - - 17,901 37,063 - - - 54,964 - - - - - - - - 64,206 $- - - 18,838 33,172 - - 1,000 57,010 -47- KAWERAK, INC. COMBINING STATEMENT OF REVENUE AND EXPENSES ADMINISTRATION DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 1 of 4 112-19 118-07 124-19 147-15 174-19 184-20 190-00 Rasmuson MACG NSEDC Regional Katirvik Ivory Museum KCC Cultural Regional Ramah Conference Fund Cultural Center Roundtable Sales Knowledge Accessibility Conference Settlement REVENUES Grant revenue $5,833 145,452 - - - - - Contributions - 7,582 25,000 - - - - Investment income - - - - - - - Other - 1,900 - 425 131,281 2,000 - Total revenues 5,833 154,934 25,000 425 131,281 2,000 - EXPENSES Personnel services - 50,928 - - 112,038 - - Professional services - - - - - - - Travel and per diem - 3,430 14,190 - 398 - - Supplies 3,527 17,875 488 240 584 - - Equipment - - - - - - - Vehicle expense - - - - - - - Contractual services - 17,640 - - - 2,000 - Facilities expense - 78,610 - - - - - Insurance expense - 5,092 - - - - - Pass-through programs - - - - - - - Depreciation expense - - - - - - - Interest expense - - - - - - - Building costs - - - - - - - Adult vocational training - - - - - - - Direct employment - - - - - - - Other programs support - - 10,322 - - - - Scholarships, awards and donations - - - - - - - Training and tuition - - - - - - - Grant entitlement - - - - - - - Board administration and fees - - - - - - - Other operating expenses 128 8 - - - Total direct expense 3,527 173,703 25,000 248 113,020 2,000 - Allocation of indirect expense 2,306 57,502 - - 18,261 - Total expenses 5,833 231,205 25,000 248 131,281 2,000 - Excess of revenues over expenses - (76,271) - 177 - - - NET ASSETS, January 1, 2019 - 96,858 - (1,249) - - 1,071,222 FUND CLOSED - - - - - - - TRANSFERS - - - - - - (682,461) NET ASSETS, December 31, 2019 $- 20,587 - (1,072) - - 388,761 -48- KAWERAK, INC. COMBINING STATEMENT OF REVENUE AND EXPENSES ADMINISTRATION DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 2 of 4 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 FUND CLOSED TRANSFERS NET ASSETS, December 31, 2019 192-00 197-00 332-19 337-19 339-19 341-19 352-19 Ramah -Ramah Special Projects BIA Compact BIA Compact BIA Compact BIA Compact Katirvik Facility & Energy FY18 Carryover - FY18 Carryover -FY18 Carryover -FY18 Carryover -BIA Compact Cultural Center Needs Assessment Eskimo Heritage KCC ICC Summit Census 2020 Outreach $- - 11,487 19,456 13,043 2,008 150,109 - - - - - - - - - - - - - - - - - - - - - - - 11,487 19,456 13,043 2,008 150,109 3,109 - - - - - 90,766 - - - - - - - 1,384 - 2,448 - - - - 6,567 - 884 - 1,711 1,214 - 2,440 - - - - - - - - - - - - - 1,680 323,972 3,614 - 2,600 - - 30,125 - - 11,765 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 699 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 221 - - - 2,877 - - 45,526 323,972 6,946 11,765 7,887 1,214 90,766 11,432 97,256 4,541 7,691 5,156 794 59,343 56,958 421,228 11,487 19,456 13,043 2,008 150,109 (56,958) (421,228) - - - - - - - - - - - - - - - - - - - 56,958 421,228 - - - - - $- - - - - - - -49- KAWERAK, INC. COMBINING STATEMENT OF REVENUE AND EXPENSES ADMINISTRATION DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 3 of 4 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 FUND CLOSED TRANSFERS NET ASSETS, December 31, 2019 355-19 356-19 357-19 360-19 370-00 374-00 379-00 BIA Compact BIA Compact BIA Compact BIA Compact BIA Compact BIA Compact BIA Compact Eskimo Heritage Legal Cultural Self Governance Special Projects Special Projects Special Projects Program Support Center General Fund KCC Tribal Justice Polar Bear Co-MGMNT $217,821 206,324 139,787 2,861,177 31,266 205,511 21,700 - - - - - - - - - - - - - - - - - - - - - 217,821 206,324 139,787 2,861,177 31,266 205,511 21,700 127,006 109,720 84,525 - - - - - - - - - - - 3,219 11,680 - - - 110,872 - 784 1,092 - - - 5,681 - - 119 - - - - - - - - - - - - 700 - - - 20,391 - - - 267 - - - - - - - - - - - - - - - 1,730,062 - - 19,530 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 979 - - - - - - - - - - - - - - - - - - - - 901 - - - 19,044 - 131,709 124,758 84,525 1,730,062 20,391 135,597 19,530 86,112 81,566 55,262 1,131,115 10,875 69,914 2,170 217,821 206,324 139,787 2,861,177 31,266 205,511 21,700 - - - - - - - - - - - - - - - - - - - - - - - - - - - - $- - - - - - - -50- KAWERAK, INC. COMBINING STATEMENT OF REVENUE AND EXPENSES ADMINISTRATION DIVISION Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information Page 4 of 4 REVENUES Grant revenue Contributions Investment income Other Total revenues EXPENSES Personnel services Professional services Travel and per diem Supplies Equipment Vehicle expense Contractual services Facilities expense Insurance expense Pass-through programs Depreciation expense Interest expense Building costs Adult vocational training Direct employment Other programs support Scholarships, awards and donations Training and tuition Grant entitlement Board administration and fees Other operating expenses Total direct expense Allocation of indirect expense Total expenses Excess of revenues over expenses NET ASSETS, January 1, 2019 FUND CLOSED TRANSFERS NET ASSETS, December 31, 2019 851-00 912-00 914-00 919-19 921-19 926-19 Museum First Sitnasuak Education Moore Safeway Rasmuson Alaskanc Tax Credit Ivory Initiative Foundation Foster Children Gifts Foundation Institute Total $- - - - - - 4,030,974 - - - 3,600 500 - 36,682 - - - - - - - - - - - - 16,044 151,650 - - - 3,600 500 16,044 4,219,306 40,916 - - - - 10,423 629,431 - - - - - - - 6,638 - - - - 154,259 24,016 - - 1,421 5,621 71,705 - - - - - - 2,559 - - - - - - - 5,300 - - - - - 377,897 - - - - - - 120,767 - - - - - - 5,092 - - - - - - 1,749,592 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 11,021 - - - - - - - - - - - - - 979 - - - - - - - - - - - - - - - - - - - 23,179 76,870 - - 1,421 - 16,044 3,146,481 22,352 - - - - - 1,723,648 99,222 - - 1,421 - 16,044 4,870,129 (99,222) - - 2,179 500 - (650,823) 99,222 (1,777) 10,000 - (500) - 1,273,776 - 1,777 (1,777) - - - - - - - - - - (204,275) $- - 8,223 2,179 - - 418,678 -51- Budget Remaining Budget Prior Current Basis Balance REVENUES Grant $210,577 57,860 152,717 210,577 - EXPENSES Personnel services 106,389 29,932 68,496 98,428 7,961 Travel 32,525 6,875 32,125 39,000 (6,475) Facility expense 2,400 2,763 117 2,880 (480) Supplies 16,108 3,922 8,993 12,915 3,193 Equipment - - - - - Other operating expenses 5,500 1,295 8,404 9,699 (4,199) Indirect costs 47,655 13,073 34,582 47,655 - 210,577 57,860 152,717 210,577 - Excess (deficiency) ofrevenues over expenses $- - - - - Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information. KAWERAK, INC. STATEMENT OF REVENUES AND EXPENSES BUDGET AND ACTUAL Rural Child Welfare Services Program - FY19 -52- Budget Remaining Budget Prior Current Basis Balance REVENUES Grant $229,577 - 115,676 115,676 (113,901) EXPENSES Personnel services 119,405 - 65,030 65,030 54,375 Travel 33,400 - 11,570 11,570 21,830 Facility expense 3,600 - 3,835 3,835 (235) Supplies 16,894 - 8,093 8,093 8,801 Equipment - - - - - Other operating expenses 3,000 - 303 303 2,697 Indirect costs 53,278 - 26,845 26,845 26,433 229,577 - 115,676 115,676 113,901 Excess (deficiency) ofrevenues over expenses $- - - - - Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information. KAWERAK, INC. STATEMENT OF REVENUES AND EXPENSES BUDGET AND ACTUAL Rural Child Welfare Services Program - FY20 -53- Budget Remaining Budget Prior Current Basis Balance REVENUES Grant $215,183 122,178 93,005 215,183 - Other - - - - - 215,183 122,178 93,005 215,183 - EXPENSES Personnel services 161,013 89,542 71,196 160,738 275 Travel 1,330 1,194 - 1,194 136 Facility expense - 9 10 19 (19) Supplies 1,943 1,443 867 2,310 (367) Equipment - - - - - Other operating expenses 2,200 2,000 225 2,225 (25) Indirect costs 48,697 27,990 20,707 48,697 - 215,183 122,178 93,005 215,183 - Excess (deficiency) ofrevenues over expenses $- - - - - Year ended December 31, 2019 -54- See Independent Auditor's Report on Supplementary Information. KAWERAK, INC. STATEMENT OF REVENUES AND EXPENSES BUDGET AND ACTUAL Children's Advocacy Center - FY19 Budget Remaining Budget Prior Current Basis Balance REVENUES Grant $215,183 - 76,778 76,778 138,405 Other - - - - - 215,183 - 76,778 76,778 138,405 EXPENSES Personnel services 159,623 - 58,117 58,117 101,506 Travel 1,330 - - - 1,330 Facility expense - - 14 14 (14) Supplies 2,093 - 829 829 1,264 Equipment - - - - - Other operating expenses 2,200 - - - 2,200 Indirect costs 49,937 - 17,818 17,818 32,119 215,183 - 76,778 76,778 138,405 Excess (deficiency) ofrevenues over expenses $- - - - - Year ended December 31, 2019 -55- See Independent Auditor's Report on Supplementary Information. KAWERAK, INC. STATEMENT OF REVENUES AND EXPENSES BUDGET AND ACTUAL Children's Advocacy Center - FY20 Budget Remaining Budget Prior Current Basis Balance REVENUES Grant $226,001 100,293 125,708 226,001 - EXPENSES Personnel services 155,372 75,498 94,979 170,477 (15,105) Travel 15,565 1,844 1,515 3,359 12,206 Facility expense 1,800 249 86 335 1,465 Supplies 1,119 19 666 685 434 Equipment 400 - - - 400 Other operating expenses 600 - - - 600 Indirect costs 51,145 22,683 28,462 51,145 - 226,001 100,293 125,708 226,001 - Excess (deficiency) ofrevenues over expenses $- - - - - Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information. KAWERAK, INC. STATEMENT OF REVENUES AND EXPENSES BUDGET AND ACTUAL Native Employment Work Services - FY19 -56- Budget Remaining Budget Prior Current Basis Balance REVENUES Grant $173,573 - 54,278 54,278 119,295 EXPENSES Personnel services 121,172 - 40,619 40,619 80,553 Travel 8,620 - - - 8,620 Facility expense 1,200 - 893 893 307 Supplies 500 - 170 170 330 Equipment 1,800 - - - 1,800 Other operating expenses - - - - - Indirect costs 40,281 - 12,596 12,596 27,685 173,573 - 54,278 54,278 119,295 Excess (deficiency) ofrevenues over expenses $- - - - - Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information. KAWERAK, INC. STATEMENT OF REVENUES AND EXPENSES BUDGET AND ACTUAL Native Employment Work Services - FY20 -57- Budget Remaining Budget Prior Current Basis Balance REVENUES Grant $150,000 77,616 72,384 150,000 - Other - - 4,500 4,500 (4,500) 150,000 77,616 76,884 154,500 (4,500) EXPENSES Personnel services 68,991 42,029 21,817 63,846 5,145 Travel 8,500 6,836 442 7,278 1,222 Facility expense 11,256 7,199 6,012 13,211 (1,955) Supplies 1,000 686 8,736 9,422 (8,422) Equipment - 2,473 1,030 3,503 (3,503) Other operating expenses 33,656 3,600 27,043 30,643 3,013 Indirect costs 26,597 14,793 11,804 26,597 - 150,000 77,616 76,884 154,500 (4,500) Excess (deficiency) ofrevenues over expenses $- - - - - -58- KAWERAK, INC. STATEMENT OF REVENUES AND EXPENSES BUDGET AND ACTUAL Behavioral Health & Early Intervention - FY19 Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information. Budget Remaining Budget Prior Current Basis Balance REVENUES Grant $150,000 88,183 88,183 61,817 EXPENSES Personnel services 72,540 - 44,752 44,752 27,788 Travel 6,095 - 1,072 1,072 5,023 Facility expense 13,316 - 6,942 6,942 6,374 Supplies 1,250 - 3,531 3,531 (2,281) Equipment - - - - - Other operating expenses 30,318 - 16,500 16,500 13,818 Indirect costs 26,481 - 15,386 15,386 11,095 150,000 - 88,183 88,183 61,817 Excess (deficiency) ofrevenues over expenses $- - - - - -59- KAWERAK, INC. STATEMENT OF REVENUES AND EXPENSES BUDGET AND ACTUAL Behavioral Health & Early Intervention - FY20 Year ended December 31, 2019 See Independent Auditor's Report on Supplementary Information. FEDERAL SINGLE AUDIT REPORTS AND SCHEDULES -60- Pass-thr ough Federal Entity Identifying CFDA Current Expenditures to Number Number Expenditures Subrecipients DEPARTMENT OF THE INTERIOR 220-19 477 EESS 15.022 $2,223,829 30,000 332-379 Consolidated Tribal Government Program (BIA Compact)15.022 10,851,798 1,749,592 13,075,627 1,779,592 233-19 Marine Mammal Protection Act 15.608 68,636 - 233-20 Marine Mammal Protection Act 15.608 103,590 - 172,226 - 238-19 USFWS Migratory Birds 15.643 31,824 - 260-17 NPS-Beringia Supernatural Environment 15.946 31,962 - 281-16 NPS-EWC Chukotka Traditional Knowledge of Pacific Walrus 15.946 1,278 - 33,240 - Total Department of the Interior 13,312,917 1,779,592 DEPARTMENT OF HEALTH AND HUMAN SERVICES 221-18 Head Start Program 93.600 367,485 - 221-19 Head Start Program 93.600 3,012,737 - 280-19 Early Head Start-Child Care Partnership 93.600 1,698,072 - 280-20 Early Head Start-Child Care Partnership 93.600 244,585 - 5,322,879 - 267-19 Northwest Alaska Wellness Initiative 93.243 679,410 - 267-20 Northwest Alaska Wellness Initiative 93.243 152,714 - 273-21 SAMHSA - Youth Initiative 93.243 24,047 - 856,171 - 232-19 Child Welfare Services 93.645 26,504 - 232-20 Child Welfare Services 93.645 7,950 - 34,454 - TANF Cluster 486-19 (1)Native Employment Work Service 604-265-18001 93.558 125,707 - 486-20 (1)Native Employment Work Service 604-265-19001 93.558 54,278 - 472-18 (1)Children's Advocacy Centers 603-241-18004 93.558 93,005 - 472-19 (1)Children's Advocacy Centers 603-241-19004 93.558 76,778 - 349,768 - 231-19 Safe & Stable Families 93.556 34,534 - 231-20 Safe & Stable Families 93.556 16,705 - 51,239 - 294-19 Bering Straits Region Safe Homes and Education Project 93.933 188,884 - 294-20 Bering Straits Region Safe Homes and Education Project 93.933 55,854 - 244,738 - Total Department of Health and Human Services 6,859,249 - DEPARTMENT OF EDUCATION 226-19 Vocational Rehabilitation Services Project 84.250K 306,868 - 226-20 Vocational Rehabilitation Services Project 84.250K 107,544 - 414,412 - 292-19 ANEP - Bering Strait Regional ABE 84.356A 229,927 - 292-20 ANEP - Bering Strait Regional ABE 84.356A 47,983 - 277,910 - 466-19 (1)Adult Basic Education Program 2019-12 84.002A 40,492 - 466-20 (1)Adult Basic Education Program 2020-12 84.002A 16,806 - 57,298 - 298-19 Kawerak Aviation Project 84.101A 421,972 204,628 298-20 Kawerak Aviation Project 84.101A 35,058 - 457,030 204,628 Total Department of Education 1,206,650 204,628 DEPARTMENT OF COMMERCE 234-19 EDA Business Plan 11.302 70,000 - 237-17 EDA Technical Assistance Planning 11.302 162,248 - 232,248 - 288-19 (2)Alaska Sealife-Arctic IERP A95-01a 11.472 18,315 - Total Department of Commerce 250,563 - KAWERAK, INC. SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended December 31, 2019 Granting Agency -61- Pass-thr ough Federal Entity Identifying CFDA Current Expenditures to Number Number Expenditures Subrecipients DEPARTMENT OF ENERGY 287-17 Bering Strait Energy Planning Network 81.087 $351,627 - Total Department of Energy 351,627 - DEPARTMENT OF JUSTICE 255-21 CTAS - Tribal Victim Assistance 16.582 140,668 - 140,668 - 282-18 CTAS-Safe Home Representative 16.587 166,131 - 254-22 OVC - Tribal Set Aside 16.841 13,335 - Total U.S. Department of Justice 320,134 - DEPARTMENT OF AGRICULTURE 160-19 (1)EHS-CC Partnership Wrap Around Service 25001 10.558 4,926 - 160-20 (1)EHS-CC Partnership Wrap Around Service 25001 10.558 2,375 - 221-18 (1)Head Start Program (USDA Food Reimbursement)25001 10.558 10,767 - 221-19 (1)Head Start Program (USDA Food Reimbursement)25001 10.558 88,584 - 280-19 (1)Early Head Start (USDA Food Reimbursement)25001 10.558 16,486 - 280-20 (1)Early Head Start (USDA Food Reimbursement)25001 10.558 7,949 - 131,087 - 296-20 USDA - Technical Assistance & Training 10.761 1,545 - Total U.S. Department of Agriculture 132,632 - Highway Planning and Construction Cluster 203-21 (1)Shishmaref Relocation Road Planning and Environmental Study 25-20-1-006 20.205 10,613 - 320-19 Federal Roads Program 20.205 8,106,399 - 320-20 Federal Roads Program 20.205 1,567,736 - 325-19 ARRA-Savoonga Transportation Funds 20.205 34,313 - 325-20 ARRA-Savoonga Transportation Funds 20.205 7,830 - 9,726,891 - 297-19 Pipeline and Hazardous Materials Safety Administration 20.703 131,772 - 297-20 Pipeline and Hazardous Materials Safety Administration 20.703 41,010 - 172,782 - Total Department of Transportation 9,899,673 - ENVIRONMENTAL PROTECTION AGENCY 285-19 Tribal Response Program-Brownfields 66.817 112,844 - 285-20 Tribal Response Program-Brownfields 66.817 50,808 - 163,652 - 265-19 EPA IGAP 66.926 109,688 - 265-20 EPA IGAP 66.926 34,030 - 143,718 - Total Environmental Protection Agency 307,370 - NATIONAL SCIENCE FOUNDATION 149-19 (3)Collaborative Research with ICC Program 1732373 47.050 12,989 - 276-14 NSF Research 47.050 3,328 - 299-20 (4)NSF Research-Shishmaref Flooding S2115A-A 47.050 7,367 Total National Science Foundation 23,684 - DEPARTMENT OF HOSING AND URBAN DEVELOPMENT 279-19 (5)BSRHA - 2019 Foster Family Event 2019KCFSYG 14.867 10,000 - Total Department of Housing and Urban Development 10,000 - DENALI COMMISSION 247-20 Golovin Subdivision Design 90.100 28,488 - Total Denali Commission 28,488 - Total Federal Awards $32,702,987 1,984,220 (1) Funds passed through State of Alaska (2) Funds passed through North Pacific Research Board (3) Funds passed through Inuit Circumpolar Council Alaska (4) Funds passed through Oregon State University (5) Funds passed through Bering Straits Regional Housing Authority DEPARTMENT OF TRANSPORTATION Granting Agency SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, Continued Year ended December 31, 2019 KAWERAK, INC. -62- KAWERAK, INC. NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (SEFA) includes the federal grant activity of Kawerak, Inc. under programs of the federal government for the year ended December 31, 2019. The information in this SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the SEFA presents only a selected portion of the operations of Kawerak, Inc., it is not intended to and does not present the financial position, changes in net assets, or cash flows of Kawerak, Inc. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. 3. INDIRECT COST RATE Kawerak, Inc. has not elected to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. -63- KOHLER, SCHMITT & HUTCHISON A Professional Corporation Certified Public Accountants 714 4th Avenue, Suite 303 • (907) 456-6676 • Fax 456-6431 P.O. Box 70607, Fairbanks, Alaska 99707-0607 • ksh@kshcpa.com INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Kawerak, Inc. We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Kawerak, Inc. (a nonprofit organization), which comprise the statement of financial position as of December 31, 2019, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated May 26, 2020. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Kawerak, Inc’s. internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Kawerak, Inc.’s internal control. Accordingly, we do not express an opinion on the effectiveness of Kawerak, Inc.’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. -64- Compliance and Other Matters As part of obtaining reasonable assurance about whether Kawerak, Inc.’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. May 26, 2020 Fairbanks, Alaska -65- KOHLER, SCHMITT & HUTCHISON A Professional Corporation Certified Public Accountants 714 4th Avenue, Suite 303 • (907) 456-6676 • Fax 456-6431 P.O. Box 70607, Fairbanks, Alaska 99707-0607 • ksh@kshcpa.com INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Directors Kawerak, Inc. Report on Compliance for Each Major Federal Program We have audited Kawerak, Inc.’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Kawerak, Inc.’s major federal programs for the year ended December 31, 2019. Kawerak, Inc.’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of Kawerak, Inc.’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Kawerak, Inc.’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Kawerak, Inc.’s compliance. Opinion on Each Major Federal Program In our opinion, Kawerak, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2019. -66- Report on Internal Control over Compliance Management of Kawerak, Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Kawerak, Inc.’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Kawerak, Inc.’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. May 26, 2020 Fairbanks, Alaska -67- KAWERAK, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31, 2019 SUMMARY OF AUDITOR’S RESULTS Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: Material weaknesses identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? Yes X None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards Type of auditor’s report issued on compliance for major programs: Unmodified Internal control over major programs: Material weaknesses identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? Yes X None Reported Any audit findings disclosed that are required to be reported in accordance with 2 CFR section 200.516(a): Yes X No Identification of major programs: CFDA Number Name of Federal Program or Cluster 81.087 Bering Strait Energy Planning Network 84.101A Kawerak Aviation Project 84.250K Vocational Rehabilitation Services Project 93.600 Head Start and Early Head Start Child Care Partnership Dollar threshold used to distinguish between type A and type B programs: $981,090 Auditee qualified as low-risk auditee? X Yes No FINDINGS – FINANCIAL STATEMENTS AUDIT None reported FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT None reported -68- STATE SINGLE AUDIT REPORTS AND SCHEDULES -69- Grant/Contract Number Expenditures DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT 466-19 Adult Basic Education Program 2019-12 $94,482 466-20 Adult Basic Education Program 2020-12 31,210 125,692 Total Department of Labor & Workforce Development 125,692 DEPARTMENT OF EDUCATION & EARLY DEVELOPMENT 469-19 Head Start Program*HS 19.181.01 326,900 469-20 Head Start Program*HS 20.181.01 235,041 561,941 Total Department of Education & Early Development 561,941 DEPARTMENT OF HEALTH & SOCIAL SERVICES 462-19 Rural Child Welfare Services*603-257-19004 152,717 462-20 Rural Child Welfare Services*603-257-20004 115,676 268,393 490-19 Behavioral Health & Early Intervention* 602-207-19016 72,384 490-20 Behavioral Health & Early Intervention* 602-207-20004 88,183 160,567 Total Department of Health & Social Services 428,960 DEPARTMENT OF PUBLIC SAFETY 465-19 VPSO Program*VPSO 19-406 477,927 465-20 VPSO Program* VPSO 20-406 499,314 Total Department of Public Safety 977,241 DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC DEVELOPMENT 487-19 Designated Legislative Grant Program*19-DO-002 98,743 487-20 Designated Legislative Grant Program*20-DO-002 97,898 Total Department of Commerce, Community & Economic Development 196,641 TOTAL STATE AWARDS $2,290,475 *State M ajor Programs KAWERAK, INC. SCHEDULE OF STATE FINANCIAL ASSISTANCE Year ended December 31, 2019 Granting Agency -70- KAWERAK, INC. NOTES TO SCHEDULE OF STATE FINANCIAL ASSISTANCE BASIS OF PRESENTATION The accompanying schedule of state financial assistance (Schedule) includes the state grant activity of Kawerak, Inc. under programs of the state government for the year ended December 31, 2019. The information in this schedule is presented in accordance with the requirements of State of Alaska Audit Guide and Compliance Supplement for State Single Audits. Because the Schedule presents only a selected portion of the operations of Kawerak, Inc., it is not intended to and does not present the financial position, changes in net assets, or cash flows of Kawerak, Inc. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting, which is described in Note 1 to Kawerak, Inc.’s financial statement. -71- KOHLER, SCHMITT & HUTCHISON A Professional Corporation Certified Public Accountants 714 4th Avenue, Suite 303 • (907) 456-6676 • Fax 456-6431 P.O. Box 70607, Fairbanks, Alaska 99707-0607 • ksh@kshcpa.com INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Kawerak, Inc. We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Audit Standards issued by the Comptroller General of the United States, the financial statements of Kawerak, Inc., which comprise the statement of financial position as of December 31, 2019, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated May 26, 2020. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Kawerak, Inc.’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Kawerak, Inc.’s internal control. Accordingly, we do not express an opinion on the effectiveness of Kawerak, Inc.’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. -72- Compliance and Other Matters As part of obtaining reasonable assurance about whether Kawerak, Inc.’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. May 26, 2020 Fairbanks, Alaska -73- KOHLER, SCHMITT & HUTCHISON A Professional Corporation Certified Public Accountants 714 4th Avenue, Suite 303 • (907) 456-6676 • Fax 456-6431 P.O. Box 70607, Fairbanks, Alaska 99707-0607 • ksh@kshcpa.com INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR STATE PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE STATE OF ALASKA AUDIT GUIDE AND COMPLIANCE SUPPLEMENT FOR STATE SINGLE AUDITS Board of Directors Kawerak, Inc. Report on Compliance for Each Major State Program We have audited Kawerak, Inc.’s compliance with the types of compliance requirements described in the State of Alaska Audit Guide and Compliance Supplement for State Single Audits that could have a direct and material effect on each of Kawerak, Inc.’s major state programs for the year ended December 31, 2019. Kawerak, Inc.’s major state programs are identified in the accompanying schedule of state financial assistance. Management’s Responsibility Management is responsible for compliance with state statutes, regulations, and the terms and conditions of its state awards applicable to its state programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of Kawerak, Inc.’s major state programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of the State of Alaska Audit Guide and Compliance Supplement for State Single Audits. Those standards and the State of Alaska Audit Guide and Compliance Supplement for State Single Audits require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state program occurred. An audit includes examining, on a test basis, evidence about Kawerak, Inc.’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major state program. However, our audit does not provide a legal determination of Kawerak, Inc.’s compliance. Opinion on Each Major State Program In our opinion, Kawerak, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major state programs for the year ended December 31, 2019. -74- Report on Internal Control over Compliance Management of Kawerak, Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Kawerak, Inc.’s internal control over compliance with the types of requirements that could have a direct and material effect on each major state program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major state program and to test and report on internal control over compliance in accordance with the State of Alaska Audit Guide and Compliance Supplement for State Single Audits, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Kawerak, Inc.’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a state program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a state program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a state program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the State of Alaska Audit Guide and Compliance Supplement for State Single Audits. Accordingly, this report is not suitable for any other purpose. May 26, 2020 Fairbanks, Alaska -75- KAWERAK, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended December 31, 2019 SECTION 1 - SUMMARY OF AUDITOR’S RESULTS Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: Material weaknesses identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? Yes X None reported Noncompliance material to financial statements noted? Yes X No State Financial Assistance Type of auditor’s report issued on compliance for major programs: Unmodified Internal control over major programs: Material weaknesses identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? Yes X None reported Dollar threshold used to distinguish a state major program: $ 150,000 SECTION II - FINANCIAL STATEMENT FINDINGS Kawerak, Inc. did not have any findings that relate to the financial statements. SECTION III – STATE AWARD FINDINGS AND QUESTIONED COSTS Kawerak, Inc. did not have any findings that relate to the state awards. -76- Appendix of Attachments Kawerak REF Proposal “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Table of Contents Detailed Scope of Work for Kawerak REF……………………………………………………….1 Scope of Work & Quote from ACEP……………………………………………………………..6 Scope of Work & Quote from CRW Engineering…………………….…………………………14 Scope of Work from Deerstone Consulting for TEDC Grant Project (pending match)…………23 Map of Kawerak Region; List of Kawerak Tribes……………………………………………….24 Kawerak Organizational Chart……………………………………………..……………………25 Map of Unaatuq-MINC-BSNC property boundaries………………………………………….…26 Pages from Final Report, Pilgrim Hot Springs Geothermal Exploration (ACEP, 2010-2014)….27 “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. Detailed Scope of Work 1 Kawerak, Inc. requests $372,233 from Alaska Energy Authority’s Renewable Energy Fund in order to complete the conceptual design of a geothermal power plant for Pilgrim Hot Springs, including both energy and heat production. Kawerak plans to use grant funds for project management personnel, materials and supplies, and contractual services. Alaska Center for Energy and Power (ACEP) will be the main contractor for this project, based on their experience with geothermal systems and their history working at Pilgrim Hot Springs. Between 2010 and 2014, ACEP led an extensive geothermal exploration effort at Pilgrim Hot Springs, located centrally on the Seward Peninsula. During this time period, a variety of geophysical surveys were conducted in conjunction with drilling efforts that took place during the summers of 2011, 2012, and 2013. The efforts culminated in the drilling of a large diameter well (PS 13-1) capable of high flow rates in the fall of 2013. PS 13-1 is a production well completed to a depth of 314 m with a diameter of 6 in. Natural artesian flow rates from this well are 60 gpm, while airlift-assisted flow testing of this well conducted by ACEP in September 2014 demonstrated that the well was capable of producing 300 gpm at temperatures ranging from 78.25 °C (172.85 °F) to 79.3 °C (174.74 °F). The minimal pressure changes that were measured at that time, combined with an estimated natural state heat flow from the geothermal system to be approximately 20 MWth based on thermal data collected from ground based and aerial investigations of the site, led researchers to conclude that the well has the ability to sustainably provide thermal fluid for on-site power generation and district heating applications. This well could be used as a production well to support on-site geothermal power generation using an Organic Rankine System, similar to the system installed at Chena Hot Springs. As part of this project, ACEP will work with Kawerak, Inc to hire a full-service engineering and design firm based in Alaska to support this project. This firm will be responsible for identifying project permitting requirements, reviewing geotechnical site considerations, civil design, all engineering drawings related to the conceptual design, particularly the site layout, and working with ACEP to design a cooling system and injection or discharge strategy for spend fluids consistent with state and federal regulations for wetlands areas. ACEP will support Kawerak in developing language for a Request for Proposals (RFP) for a permitting, geotechnical, and civil design subcontractor. A quote and scope description from CRW Engineering of Anchorage, Alaska is provided with this proposal for reference. As part of this effort, matching funds will be provided by Kawerak in the form of salary and materials match for project staff, as well as other match from a current Department of Energy- Office of Indian Energy Technical Assistance Grant that retains ACEP as a contractor of Kawerak. Kawerak has partnered with the Native Village of Mary’s Igloo to apply for the Bureau of Indian Affairs Division of Energy and Mineral Development – Indian Energy and Economic Development division’s Tribal Energy Development Capacity (TEDC) grant program. If the TEDC grant is awarded to Mary’s Igloo, with Kawerak as a sub-grantee, the work to be performed by Kawerak and sub-contractor Deerstone Consulting will contribute as match to the overall effort of this project and fit seamlessly into tasks related to the economic feasibility of producing geothermal power on the site. 1 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. Detailed Scope of Work 2 The scope of work for this project will consist of: Task 1: Project Scoping and Contractor Selection Kawerak is planning to hire a full-service engineering and design firm based in Alaska to support this project. This firm will be responsible for identifying project permitting requirements, reviewing geotechnical site considerations, civil design, all engineering drawings related to the conceptual design, particularly the site layout, and working with ACEP to design a cooling system and injection or discharge strategy for spend fluids consistent with state and federal regulations for wetlands areas. ACEP will support Kawerak in developing language for an RFP for a permitting, geotechnical, and civil design subcontractor. Task 2: Design Specifications for Geothermal Power Plant and Review of Potential Equipment Vendors ACEP will develop specifications for a geothermal power plant for the Pilgrim Hot Springs site based on known characteristics of the resource combined with expected current and future site loads. Based on the data from the flow test conducted in 2014, the resource should be capable of producing 300 kW from the existing production well PS 13-1, or up to 5 MW based on the overall natural state heat flow from the system to the surrounding environment. Developing a smaller plant as a phase 1 project is an excellent way to stress test the resource over time, collecting data to both better quantify the precise upflow zone of the geothermal fluids and better assessing the maximum sustainable generation that the resource could be capable of supporting. In addition to the capacity of the resource to support power generation, it will be important to design a power plant that can operate independently of an existing grid. Many ORC systems are designed as synchronous machines and cannot operate in the absence of an existing grid. This has been a significant challenge for Chena Hot Springs, which has not been able to operate independently from a diesel system forming the backbone of the electric grid and providing necessary parameters (voltage and frequency) for the ORC to follow. This can be avoided through careful selection of the generator, or by pairing the geothermal plant with a battery/inverter system which could also help balance load and allow other energy resources to support site demand. ACEP will explore both pathways, with the goal of developing specifications for a Request for Information (RFI) soliciting vendor information for prospective equipment manufacturers. Sub-tasks in this section include load forecasting, design parameters for power plant, and equipment vendor assessment. Task 3: Support Site Infrastructure Design ACEP will work closely with engineering subcontractors retained by Kawerak, on site design to support power generation from the geothermal resource while providing for long-term sustainability of the resource. ACEP will be responsible for sharing data related to the resource on behalf of Kawerak, and communicating specifications related to the power plant design. ACEP will also support Kawerak in the review of draft plans, drawings, and infrastructure design recommendations and provide feedback as appropriate. Other tasks in this section will include identifying needed permits for future construction of the power plant, including well water withdrawal and disposal, and site development. 2 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. Detailed Scope of Work 3 The engineering firm retained will provide a conceptual design of auxiliary power plant components, including well pump sizing and selection, piping layout from the well to the power plant and from the power plant to the discharge location, and a cooling system for the generator. They will also develop engineering design drawings, including site design and facilities layout, concept system process schematic, and provide system alternatives to consider. Task 4: Distribution System Design The Pilgrim Hot Springs geothermal site is currently considered a greenfield site, without any sort of existing permanent generation or distribution infrastructure. Site power, when needed, is currently provided by imported and portable generators. In addition to power plant design, it will be important to carefully think through the layout of the electrical distribution system. This also provides a unique opportunity to consider some non-traditional approaches that could enable Kawerak and Unaatuq, LLC to seek DOE funds. Chief among these alternatives could be an entirely DC-based microgrid. While it is understood that the REF is not intended to fund nonconforming technologies, there may be value in conducting at least a preliminary assessment of alternative grid architectures as it is expected that there could be future federal funds available for innovative design in this space. As part of the distribution design, the engineering firm will develop a plan for well water disposal, including discharge to the surface through a pool/pond, and/or discharge to groundwater through an underground injection well. The engineering firm will also identify additional data or other information that will be required for permitting efforts. Task 5: Assessment of Alternatives ACEP will conduct a due diligence analysis of alternative energy sources at the site. In addition to traditional diesel generation, ACEP will consider solar as an alternative. This aligns well with an initial summer-only operation as proposed by Kawerak. Surveys of Alaska installations show costs ranging from $2.20 to $5.00/Watt for remote installations larger than ~45 kW. Capacity factors range from 8%-16%. For the Nome area, according to NREL's PVWatts tool, solar irradiance levels are on the order of 5-6 kWh/m2/day in the summer months, and a ~300 kW array is predicted to yield a little over 300,000 kWh total annual energy production. Alaska’s cold temperatures increase system voltage, reduce electrical resistance, and yield higher-than-rated outputs associated with reflected light and albedo effects. These factors, combined with declining module prices, are making solar PV technology more economical. Solar PV arrays have been installed in all areas of the state from the southwest to the Arctic, and low sun angles and long daylight hours represent opportunities to mount panels vertically on walls as well as on the east and west sides of buildings. Task 6: Economic Feasibility Analysis Based on the information derived from Tasks 2-4 and on information from geothermal power plants of a similar size developed in other locations, ACEP will generate budget estimates and complete a robust economic analysis for the project as well as alternatives identified through Task 5 work. ACEP will work closely with Kawerak and the engineering firm to develop design and construction cost estimates. The engineering firm will provide estimates for one preferred system design. 3 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. Detailed Scope of Work 4 The TEDC Grant, if awarded, will contribute significantly to the economic analysis portion of this project. As economic factors are determined and the conceptual design is developed, Deerstone Consulting, as part of their TEDC project scope, will work with all project participants and stakeholders, led by the Native Village of Mary’s Igloo (applicant for the TEDC grant) and Kawerak to assist in the following tasks and deliverables: • Facilitate a Strategic Planning Session with Unaatuq Board members with advisory support from the Native Village of Mary’s Igloo and the Bering Strait Regional Energy Leadership Committee to define scenarios and energy development options for Pilgrim Hot Springs and more broadly for the Kawerak/Norton Sound region. • Perform an Economic Analysis of the income potential and requirements for an energy provider as well as a load analysis for various prospective businesses and enterprises based on development scenarios identified by project participants and stakeholders. • Conduct a Feasibility Study to determine an appropriate business structure and define development options for Unaatuq, LLC to optimize and manage the locally available energy resources—including possibly geothermal, solar, biomass, hydropower, and wind—for a sustainable economy and business foundation for Pilgrim Hot Springs. The objectives for the study are broken down as follows: • Determine what type of business structure is best suited to the energy development goals of the region (profit vs. nonprofit) • Develop options for a conceptual model for selling geothermal power at Pilgrim Hot Springs to outside entities • Outline the economic benefits of developing a tribally-led business utility structure including expected income, cash flow, and regional economic benefits • Determine how the business structure could also develop regulations, best practices, and resources to other regional utilities and standalone power plants • Engage Unaatuq with the Bering Strait Regional Energy Leadership Committee as an advisory group regarding energy development strategies Task 7: Stakeholder Education As part of this project, the project team and members of the Unaatuq Board Advisory Committee will travel to Chena Hot Springs in Fairbanks, Alaska to view the current geothermal power plant system at their hot springs resort. The team will meet with Chena management and staff to discuss strategies, challenges, benefits and risks associated with the system and business. The project team and Unaatuq Board Advisory Committee members will also visit the University of Alaska Fairbanks’ Campus and the Alaska Center for Energy and Power to meet with ACEP staff in person to discuss project progress, geothermal technologies, and other appropriate microgrid technologies that may be applicable to providing energy at Pilgrim Hot Springs. Task 8: Stakeholder Engagement As part of this project, two meetings will be held on site at Pilgrim Hot Springs for all project staff members, contractors, and the Unaatuq Board of Directors. During these stakeholder engagement meetings, which will take place in conjunction with ACEP’s visits to the site, Unaatuq Board Members as well as Kawerak Project Staff will come 4 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design” Kawerak, Inc. Detailed Scope of Work 5 together to view possible locations of the power plant components, water piping and distribution ideas, examine the monitoring wells and production well, and discuss options for waste water disposal. By keeping the Unaatuq Board of Directors, as well as other stakeholders, in consistent contact with Kawerak Project Staff and project contractors, there will be transparency in the project details as well as valuable opportunities for feedback, suggestions, and innovative ideas suited to the goals of the board; to help them achieve their mission and vision. Unaatuq Mission: To promote the wellbeing of our people through sharing, protecting, and responsibly developing the resources of Pilgrim Hot Springs. Unaatuq Vision: A protected arctic oasis that provides for our people. Task 9: Ongoing Grant Project Management and Financial Reporting Kawerak will work with closely with project staff and contractors to keep on task with project milestones and deliverables. Reports will be provided to Alaska Energy Authority in a timely manner and as described in the grant agreement. Financials will be recorded, documented and reported on a consistent basis throughout the life of the grant. All project activities will be shared with appropriate stakeholders, such as the Kawerak Board of Directors and the Unaatuq Board of Directors, on a consistent basis in the form of email reports, verbal updates, presentations at board meetings, and through department newsletters. 5 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Office of Grants and Contracts Administration P.O. Box 757880, Fairbanks, Alaska 99775-7880 Tapiana Wray Principal Grant & Contract Management Officer (907) 474-1989 phone (907) 474-5506 fax uaf-ogca-preaward@alaska.edu tewray@alaska.edu www.uaf.edu/ogca/ UA is an AA/EO employer and educational institution and prohibits illegal discrimination against any individual: www.alaska.edu/titleIXcompliance/nondiscrimination. September 23, 2020 Kawerak, Inc. P.O. Box 948 Nome, Alaska 99762 Re: Letter of Commitment for proposal to Alaska Energy Authority 2020 Renewable Energy Fund The University of Alaska Fairbanks is pleased to collaborate with Kawerak, Inc., on the proposal entitled “Pilgrim Hot Springs Geothermal Power Plant Conceptual Design,” which is being submitted to the Alaska Energy Authority 2020 Renewable Energy Fund. The Principal Investigator from UAF is Gwen Holdmann, Director of the Alaska Center for Energy and Power. The appropriate administrative and programmatic personnel at UAF are aware of the pertinent state and federal regulations and policies, and we are prepared to enter into a subcontract with Kawerak, Inc., that ensures compliance with all such policies, should this proposal be funded. A statement of work, budget, and budget justification for this subaward are attached. If you have questions or need additional information, please feel free to contact me at uaf-ogca- preaward@alaska.edu. Sincerely, Tapiana Wray Principal Grant & Contract Management Officer 6 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal ACEP SCOPE OF WORK PILGRIM HOT SPRINGS GEOTHERMAL POWER PLANT CONCEPTUAL DESIGN September 22, 2020 ACEP Principal Investigator Gwen Holdmann Director, Alaska Center for Energy and Power Gwen.holdmann@alaska.edu Contracting POC Rosemary Madnick Executive Director, Office of Grants and Contracts University of Alaska Fairbanks rmadnick@alaska.edu 7 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal OBJECTIVE AND INTRODUCTION The Alaska Center for Energy and Power (ACEP) led an extensive geothermal exploration effort at Pilgrim Hot Springs between 2010 and 2014. During this time period, a variety of geophysical surveys were conducted in conjunction with three major drilling efforts. The drilling program culminated in the fall of 2013 with the drilling of a 6-in diameter production well (PS 13-1) capable of high flow rates. PS 13-1 was completed to a depth of 314 m. Natural artesian flow rates from this well are 60 gpm, while airlift- assisted flow testing of this well conducted by ACEP in September 2014 demonstrated that the well is capable of producing 300 gpm at temperatures ranging from 78.25 °C (172.85 °F) to 79.3 °C (174.74 °F). The minimal pressure changes that were measured at that time, combined with an estimated natural state heat flow from the geothermal system of approximately 20 MWth based on thermal data collected from ground-based and aerial investigations of the site, led researchers to conclude that the well has the ability to sustainably provide thermal fluid for on-site power generation and district heating applications. This well could be used as a production well to support on-site geothermal power generation using an Organic Rankine Cycle (ORC) system, similar to the system installed at Chena Hot Springs. Chena Hot Springs has been operating a small geothermal power plant ranging in output from approximately 200 to 400 kWe (net), using produced fluid at 74°C (165 °F). The Principal Investigator of this project, Gwen Holdmann, was the lead for both the prior geothermal exploration at Pilgrim Hot Springs and the development of the geothermal power plant at Chena Hot Springs, and is thus well suited to lead this proposed effort. This scope of work represents a natural extension of previous work, and focuses on supporting Kawerak in developing a geothermal power plant at the site to benefit the people of the region. SCOPE OF WORK Timelines provided below are in quarters from receipt of award. TASK 1: PROJECT SCOPING AND CONTRACTOR SELECTION Kawerak is planning to hire a full-service engineering and design firm based in Alaska to support this project. This firm will be responsible for identifying project permitting requirements; reviewing geotechnical site considerations, civil design, and all engineering drawings related to the conceptual design, particularly the site layout; and working with ACEP to design a cooling system and injection or discharge strategy for spent fluids, consistent with state and federal regulations for wetland areas. ACEP will support Kawerak in developing language for an RFP for a permitting, geotechnical, and civil design subcontractor. Deliverables: Draft language for RFP, outlining suggested responsibilities Effort: 10% of total man-hours estimated Timeline: TBD 8 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal TASK 2: DESIGN SPECIFICATIONS FOR GEOTHERMAL POWER PLANT AND REVIEW OF POTENTIAL EQUIPMENT VENDORS ACEP will develop specifications for a geothermal power plant for the Pilgrim Hot Springs site, based on known characteristics of the resource and expected current and future site loads. Based on data from the flow test conducted in 2014, the resource should be capable of producing 300 kW from existing production well PS 13-1, or up to 5 MW based on the overall natural state heat flow from the system to the surrounding environment. Developing a smaller plant as a Phase 1 project is an excellent way to stress test the resource over time, collecting data to both better quantify the precise upflow zone of the geothermal fluids and better assess the maximum sustainable generation capacity of the resource. It will also be important to design a power plant that can operate independently of an existing grid. Many ORC systems are designed as synchronous machines and cannot operate in the absence of an existing grid. This has been a significant challenge for Chena Hot Springs, which has not been able to operate independently from a diesel system forming the backbone of the electric grid and providing necessary parameters (voltage and frequency) for the ORC to follow. This issue can be avoided through careful selection of the generator, or by pairing the geothermal plant with a battery/inverter system that could also help balance load and allow other energy resources to support site demand. ACEP will explore both options, with the goal of developing specifications for a Request for Information (RFI) to solicit vendor information for prospective equipment manufacturers. Task 2.1 – Load Forecasting. Develop a range of long-term load projections based on expected future infrastructure needs and use patterns. Task 2.2 – Establish optimal design parameters for power plant (input/output). Based on the known characteristics of the resource and the load forecast developed in Task 2.1, ACEP will publish design specifications for the system. Task 2.2 – Equipment Vendor Assessment. ACEP will conduct a market evaluation of equipment manufacturers, and complete due diligence research into existing products and projects on behalf of Kawerak. ACEP will also release an RFI to solicit specific vendor input that will be used for more advanced project design and cost modeling. Deliverables: Design specifications and vendor report (including results of RFI) for Kawerak. Effort: 45% of total man-hours estimated Timeline: TBD TASK 3: SUPPORT SITE INFRASTRUCTURE DESIGN ACEP will work closely with engineering subcontractors retained by Kawerak for on-site design to support power generation from the geothermal resource while providing for long-term sustainability of the resource. ACEP will be responsible for sharing data related to the resource on behalf of Kawerak, and communicating specifications related to the power plant design. ACEP will also support Kawerak in reviewing draft plans, drawings, and infrastructure design recommendations and providing feedback as appropriate. 9 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Deliverables: Data package for engineering subcontractor, written feedback on preliminary design. Effort: 10% of total man-hours estimated Timeline: TBD TASK 4: DISTRIBUTION SYSTEM DESIGN The Pilgrim Hot Springs geothermal site is currently considered a greenfield site, without any sort of existing permanent generation or distribution infrastructure. Site power, when needed, is currently provided by imported and portable generators. In addition to power plant design, it will be important to carefully think through the layout of the electrical distribution system. This provides a unique opportunity to consider non-traditional approaches that could enable Kawarak and Unaatuq, LLC to seek DOE funds. Chief among these alternatives could be an entirely DC-based microgrid. While it is understood that the Renewable Energy Fund is not intended for nonconforming technologies, there may be value in conducting at least a preliminary assessment of alternative grid architectures since future federal funds could be available for innovative design in this space. Deliverables: Distribution grid layout options, provided to engineering subcontractor to incorporate into conceptual design for site layout. Effort: 10% of total man-hours estimated Timeline: TBD TASK 5: ASSESSMENT OF ALTERNATIVES ACEP will conduct a due diligence analysis of alternative energy sources at the site. In addition to traditional diesel generation, ACEP will consider solar power as an alternative. This aligns well with an initial summer-only operation as proposed by Kawerak. Surveys of Alaska installations show costs ranging from $2.20 to $5.00/Watt for remote installations larger than ~45 kW. Capacity factors range from 8%-16%. For the Nome area, according to NREL's PVWatts tool, solar irradiance levels are on the order of 5-6 kWh/m2/day in the summer months, and an ~300 kW array is predicted to yield a little over 300,000 kWh total annual energy production. Alaska’s cold temperatures increase system voltage, reduce electrical resistance, and yield higher-than- rated outputs associated with reflected light and albedo effects. These factors, combined with declining module prices, are making solar photovoltaic (PV) technology more economical. Solar PV arrays have been installed in all areas of the state, from the southwest to the Arctic, and low sun angles and long daylight hours represent opportunities to mount panels vertically on walls as well as on the east and west sides of buildings. Deliverables: Analysis of solar and diesel as alternatives. Effort: 10% of total man-hours estimated Timeline: TBD 10 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal TASK 6: ECONOMIC FEASIBILITY ANALYSIS Based on the information derived from Tasks 2-4 and on information from geothermal power plants of a similar size developed in other locations, ACEP will generate budget estimates and complete a robust economic analysis for the project, as well as alternatives identified though Task 5 work. Deliverables: Report on economic feasibility and alternatives. Effort: 15% of total man-hours estimated Timeline: TBD 11 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal BUDGET JUSTIFICATION Budget Category Total Salaries Gwen Holdmann (executive staff, $79.25), 160 hours $15,674 Christopher Pike (exempt staff, $37.16), 160 hours $7,563 Robert Bensin (exempt staff, $37.95), 80 hours $3,862 Jeremy Vandermeer (exempt staff, $33.00), 500 hours $20,988 Stephen Colt (adjunct faculty, $370.37), 40 hours $14,844 M.S. graduate student ($23), 640 summer hours $14,735 Total salaries $77,666 Fringe benefits Executive staff, 27.6% $4,326 Exempt staff, 42.5% $13,775 Adjunct faculty, 11.1% $1,648 Graduate student, 9.7% during summer months $1,429 Graduate student health insurance $734 Total fringe benefits $21,912 Travel Fairbanks, AK-Nome, AK, 2 trips, 2 people, 3 days/nights per trip $5,436 Other Costs Poster printing, etc. $500 Truck rental $900 Total Direct Costs $106,414 Modified Total Direct Costs (MTDC) $105,514 Indirect Costs, 25% of MTDC $26,379 Total Project $132,793 Salaries • Gwen Holdmann, Director of Alaska Center for Energy and Power (UAF executive staff): 0.92 month (160 hours). Holdmann will serve as the PI and project manager, and will be responsible for communicating with Kawerak, the engineering contractor, and leading the development of specifications, RFI, and design for the geothermal power plant. She has led prior resource evaluation efforts at Pilgrim Hot Springs, and was the lead engineer for the Chena Hot Springs geothermal power plant development which is similar in size and scope to the one proposed here. • Christopher Pike (exempt staff): 0.92 month (160 hours). Pike will be responsible for data management related to site layout and PS 13-1 characteristics as well as assessment of alternative resources. Pike was the project manager for the Pilgrim Hot Springs confirmation well drilling program and is knowledgeable about each of the drill holes on site. • Robert Bensin (exempt staff): 0.46 month (80 hours). Bensin will support planning for the electrical distribution system. He is intimately familiar with the site through prior employment with Bering Straits Native Corporation and previously led the development of a small seasonal organic farm at the site. Rob is a licensed electrician and electrical administrator in the State of Alaska. 12 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal • Jeremy Vandermeer (exempt staff): 2.89 months (500 hours). Vandemeer will support the conceptual design for the electric layout for the site, as well as specifications related to the power plant and/or ancillary support equipment (energy storage, etc). Vandermeer is an electric engineer who has previously modeled integration of a geothermal power plant at Pilgrim Hot Springs into the Nome grid. • Stephen Colt (adjunct faculty): 0.46 month (80 hours) to support economic analysis. • M.S. graduate student research assistant: 640 summer hours (16 weeks at 40 hours per week). The graduate student will participate in the economic analysis of various design alternatives to support engineering and site planning decisions. Per UA policy, salaries include a leave reserve, calculated on salary at a rate of 20.6% for executive staff, 24.1% for exempt staff, 0.2% for adjunct faculty, and 0.1% for students. Salaries also include a 2.5% annual escalation for executive and exempt staff). Fringe Benefits Staff benefits are negotiated annually with the Office of Naval Research. FY21 provisional fringe benefits rates include 27.6% for executive staff, 42.5% for exempt staff, 11.1% for adjunct faculty, and 9.7% for students during the summer months. A copy of the current rate agreement is available at: http://www.alaska.edu/cost-analysis/negotiation-agreements/ Health insurance is included for the graduate student research assistant during the summer, based on academic year 2020-21 rates ($734 for summer). Travel Costs are included for two trips to Nome, Alaska, for two project personnel. Per person costs for each 3- day/3-night trip include $400 for airfare, $185/night for lodging, $118 per day for meals and incidental expenses, and $50 for ground transportation and airport parking. Costs are based on current pricing using Google flights, Department of Defense per diem rates, and previous travel to similar destinations for other research programs. Other Costs Funds are budgeted for printing posters and reports for project dissemination ($500) and for truck rental in Nome, Alaska, during fieldwork (2 trips, 3 days/trip, $150/day). Costs are based on similar costs for other research programs. Rental vehicle costs do not incur indirect costs. Indirect Costs Facilities and administrative (F&A) costs are calculated at 25% of the Modified Total Direct Costs (MTDC), based on the current MOA between UAF and the Alaska Department of Transportation and Public Facilities. MTDC exclude equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. A copy of the agreement is available at: http://www.alaska.edu/cost- analysis/negotiation-agreements/. Total Direct Costs: $106,414 MTDC: $105,514 Total Indirect Costs: $26,379 Total Project: $132,793 13 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Anchorage Office: 3940 Arctic Blvd. Suite 300, Anchorage, AK 99503 | (907) 562-3252 fax (907) 561-2273 Palmer Office: 808 S. Bailey St. Suite 104, Palmer, AK 99645 | (907) 707-1352 Seattle Office: 100 S. King Street, #100-749, Seattle, WA 98104 (206) 350-2791 www.crweng.com September 24, 2020 Ms. Amanda Toerdal Pilgrim Hot Springs General Manager Pilgrim Hot Springs / Unaatuq, LLC c/o Kawerak, Inc 500 Seppala Drive Nome, AK 99762 Re: Pilgrim Hot Springs Engineering Services Dear Amanda, CRW Engineering Group (CRW) is pleased to provide this proposal for engineering services to assist Unaatuq, LLC and the Alaska Center for Energy and Power (ACEP) in developing the conceptual design for a new geothermal power plant at Pilgrim Hot Springs, Alaska. We understand that the scope and fee developed for this effort are for budgetary purposes and may be refined before the work begins. An existing 6-inch diameter geothermal production well has been drilled to 314 meters. Testing on the well has been completed with a sustained flow rate of 300 gpm and a water temperature of 175° F. The well will produce approximately 60 gpm in artesian conditions. The proposed power production for the new plant is between 100 and 250 kW, at an anticipated flow rate of 200 gpm. Specific scope of work items for CRW are outlined below: SCOPE OF WORK CRW will provide the following services: 1. Coordination with ACEP and Unaatuq LLC as needed to develop the project. 2. Identify Needed Permits a. Identify the permits needed for construction of the power plant, including: i. Well water withdrawal and disposal ii. Site development iii. Power plant construction b. Identify additional data or other information that will be required for permitting efforts. 3. Develop a plan for well water disposal, including: a. Discharge to the surface through a pool/pond. b. Discharge to groundwater through an underground injection well. 4. Provide conceptual design of auxiliary power plant components, including: a. Well pump sizing and selection b. Piping layout from the well to the power plant and from the power plant to the discharge location. c. Cooling system for the generator. d. Develop engineering design drawings, including: i. Site design and facilities layout ii. Concept system process schematic iii. One alternative only 5. Develop design and construction cost estimates. a. One estimate for preferred design. 14 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Pilgrim Hot Springs Conceptual Power Plant Design 9/24/20 2 of 3 DELIVERABLES The scope items above will be presented in an engineering technical memorandum. Conceptual design drawings, engineering calculations, design and construction cost estimates, and meeting summaries will be provided as appendices to the technical memo. ASSUMPTIONS The following assumptions have been made: · No site visits or field investigations will be required. · Existing mapping and survey data for the site and surrounding area will be sufficient to complete the conceptual design WORK BY OTHERS – It is assumed that ACEP will provide the following: · Coordination with property owners and the general public. · Mechanical and electrical design of the power plant. FEE The proposed Scope of Work will be performed on a time and materials, not to exceed, basis in accordance with the attached CRW terms and conditions for an amount of $90,960. Thank you for asking CRW to provide this proposal. We appreciate the opportunity to serve Unaatuq LLC and ask that you contact us at (907)562-3252 if you have any questions or comments. Sincerely, CRW Engineering Group, LLC. Matt Edge, P.E., Principal Direct: (907) 646-5623 / email: medge@crweng.com Attachment: 1) Engineering Services Fee Estimate Breakdown 2) CRW Engineering Group, LLC Terms and Conditions, 2020 15 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Pilgrim Hot Springs Conceptual Power Plant Design 9/24/20 3 of 3 ________________________________________________________________________ ACCEPTANCE OF THE PROPOSAL AND AUTHORIZATION TO PROCEED The proposed scope of services, fee, and contract conditions are acceptable to Unaatuq LLC, and CRW Engineering Group, LLC is authorized to proceed with the work. By ______________________________ Signature _____________________________* Title ____________________________ Date _________________________________ * Person with authority to commit the resources of Unaatuq LLC. 16 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Pilgrim Hot Springs Geothermal Power Plant Concept DesignFee Proposal CRW Engineering Group, LLCTask & Subtask DescriptionSenior Principal / CMJeff Stanley, PEPrincipal / PM (Civil/Environmental)Matt Edge, PESenior Engineer (Mechanical)Tracy McKeon, PERegistered Eng/SurveyorStaff Engineer IISenior Designer Admin SupportTotal LaborExpensesSubconsultantTotal Subtask$210$200$190$160$145$145$90$$$$Concept DesignTask 1 -Technical MemorandumProject Management & Coordination216444$5,380$100$5,480Identify Needed Permits11224$6,090$6,090Well Water Disposal Plan184328$8,370$50$8,420Conceptual DesignPump Sizing and Selection22416$3,740$25$3,765Piping Layout284824$7,300$25$7,325Cooling System1163224$11,850$25$11,875Engineering DrawingsSite Design1161640$11,530$100$11,630System Process Schematic1441624$7,810$50$7,860Cost Estimates28424484$13,940$25$13,965Technical Memo Preparation and Printing42484044$14,500$50$14,550Total Task 1:15984212414412412$90,510$450$0$90,960TOTAL ALL SERVICES:15984212414412412$90,510$450$0$90,960Assumptions1No site visits are required.2No electrical design included.3Unaatuq LLC will provide topographic information to form basis of site design.4Drawings will be in AutoCAD. No specifications will be provided. CRW Engineering Group, LLCPage 1 of 1Date: 9/24/202017 of 101Kawerak-Pilgrim Hot Springs-REF Proposal CRW Engineering Group, LLC Page 1 of 5 Standard Terms and Conditions (11/6/16) 2020 SCHEDULE OF CHARGES AND STANDARD TERMS and CONDITIONS Compensation to CRW Engineering Group, LLC for our professional services is based upon the conditions set forth below: SCHEDULE OF CHARGES Charges for employees are determined by the hourly rates listed below. A new schedule is issued at the beginning of each year. Unless other arrangements have been made, charges for all work will be based on the latest Schedule of Charges and General Conditions. EMPLOYEE CATEGORY Senior Principal..................................................................................$210.00 Principal .............................................................................................$200.00 Senior Engineer/Land Surveyor.........................................................$190.00 Project Engineer/Land Surveyor ........................................................$175.00 Registered Staff Engineer/Land Surveyor .........................................$160.00 Staff Engineer/Land Surveyor II (EIT/LSIT) ....................................$145.00 Staff Engineer/Land Surveyor I .........................................................$130.00 Senior Designer..................................................................................$145.00 Engineering/Surveying Technician III...............................................$130.00 Engineering/Surveying Technician II ................................................$115.00 Engineering/Surveying Technician I .................................................$ 95.00 Clerical/Administrative Support ........................................................$ 90.00 SUPPLIES AND SERVICES Direct Expenses and Supplies ............................................................Invoice + 10% Subconsultants ...................................................................................Invoice + 10% Meals (Per Diem) ...............................................................................$60.00/day In-house Expenses Xerox (8-1/2 x 11) ....................................................................$0.10/copy Xerox (11 x 17) .........................................................................$0.20/copy Color Copies (8-1/2 x 11) .........................................................$1.00/copy Mileage (Federal Rate) .............................................................$0.58/mile Bond Plots .................................................................................$1.00/square foot Mylar Plots ................................................................................$2.00/square foot 18 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal CRW Engineering Group, LLC Page 2 of 5 Standard Terms and Conditions (11/6/16) CRW ENGINEERING GROUP, LLC STANDARD TERMS AND CONDITIONS 1. INVOICES AND PAYMENT TERMS CRW Engineering Group, LLC (CRW) will submit invoices to CLIENT not more than every thirty (30) days and a final bill upon completion of Services. CLIENT shall notify CRW within ten (10) days of receipt of invoice of any dispute with the invoice. CLIENT and CRW will promptly resolve any disputed items. Payment on undisputed invoice amounts is due upon receipt of invoice by CLIENT and is past due thirty (30) days from the date of the invoice. CLIENT agrees to pay a finance charge of one and one-half percent (1-1/2%) per month, or the maximum rate allowed by law, on past due accounts. If payment remains past due sixty (60) days from the date of the invoice, then CRW shall have the right to suspend all work under this Agreement, without prejudice. CLIENT shall pay all reasonable demobilization and other suspension costs. CLIENT agrees to pay attorneys’ fees, legal costs and all other collection costs incurred by CRW in pursuit of past due payments. Our hourly rates do not include a sales tax and these will be added if they become applicable in any jurisdiction. 2. CHANGES CLIENT and CRW recognize that it may be necessary to modify the scope of Services, the schedule, and/or the cost estimate proposed in this Agreement. CRW shall notify CLIENT in a timely manner when it has reason to believe a change to the Agreement is warranted. CRW shall prepare a Change Order request outlining the changes to the scope, schedule, and/or cost of the project. CLIENT has a duty to promptly consider the Change Order request and advise CRW in a timely manner in writing on how to proceed. If after a good faith effort by CRW an agreement has not been reached with the CLIENT, then CRW shall have the right to terminate this Agreement upon written notice to the CLIENT. 3. DELAYS AND FORCE MAJEURE CLIENT shall not hold CRW responsible for damages or delays in performance caused by acts of God, acts and/or omissions of Federal, State, and local governmental authorities and regulatory agencies or other events which are beyond the reasonable control of CRW. 4. TERMINATION This Agreement may be terminated by either party upon written notice in the event of substantial failure by the other party to perform in accordance with terms hereof. Such termination shall not be effective if that substantial failure has been remedied before expiration of the period specified in the written notice, such period shall not be less than seven (7) calendar days. In the event of termination, CRW shall be paid for services performed to the termination notice date including reasonable termination expenses. CRW may complete such analyses and records as are necessary to complete their files and may also complete a report on the Services performed to the date of notice of termination or suspension. The expenses of termination or suspension shall include all direct costs of CRW in completing such analyses, records, and reports. 5. DATA AND INFORMATION CLIENT shall provide to CRW all the reports, data, studies, plans, specifications, documents, and other information which are relevant to the Services. CRW shall be entitled to rely upon the reports, data, studies, plans, specifications, documents, and other information provided by CLIENT or others in performing the Services, and CRW assumes no responsibility or liability for the accuracy or completeness of such. 19 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal CRW Engineering Group, LLC Page 3 of 5 Standard Terms and Conditions (11/6/16) 6. RIGHT OF ENTRY The CLIENT will furnish CRW with the right-of-entry on the land to conduct surveys, observations, and other explorations as required. If the CLIENT does not own the site, CLIENT must obtain permission for CRW to enter the site and perform the services. CRW will take reasonable precautions to minimize damage from use of equipment, however, it is understood that in the normal course of work some surface damage may occur, the restoration of which is not part of this Agreement. The CLIENT is responsible to provide, by map or drawing, a description of the property, its location, and the location of any buried utilities or structures. CRW shall not be liable for damage or injury arising from damage to subterranean structures (pipes, tanks, telephone lines, etc.) which are not called to CRW’s attention and correctly shown on the plans furnished by the CLIENT in connection with work performed under this Agreement. 7. CONTROL OF WORK AND JOB-SITE SAFETY CRW shall be responsible only for its activities and that of its employees and subcontractors. CRW’s Services under this Agreement are performed for the sole benefit of the CLIENT and no other entity shall have any claim against CRW because of this Agreement or the performance or nonperformance of Services hereunder. CRW will not direct, supervise, or control the work of other consultants and contractors or their subcontractors. 8. PROFESSIONAL WORK PRODUCT The Service provided by CRW is intended for one time use only. All documents, including but not limited to, reports, plans, designs, field data, field notes, laboratory test data, calculations, and estimates (the “Documents”), and all electronic media prepared by CRW are considered its professional work product. CRW retains all rights to its professional work product. Copies of Documents shall be provided to CLIENT upon written request and at CLIENT’s expense. CRW shall retain these Documents for a period of two (2) years following submission of its report, during which period they will be made available to CLIENT at all reasonable times. CLIENT acknowledges that electronic media is susceptible to unauthorized modification, deterioration, and incompatibility, and therefore CLIENT shall not rely on the accuracy of the electronic media version of CRW’s professional work product. CLIENT understands that the professional work product is not intended or represented by CRW to be suitable for reuse by any party, including, but not limited to, the CLIENT, its employees, agents, subcontractors or subsequent owners on any extension of a specific project not covered by this Agreement or on any other project, whether CLIENT’s or otherwise, without CRW’s prior written permission. CLIENT agrees that any reuse unauthorized by CRW will be at CLIENT’s sole risk and that CLIENT will defend, indemnify, and hold CRW harmless from any loss or liability resulting from the reuse, misuse, or negligent use of the professional work product. 9. STANDARD OF CARE Services performed by CRW will be conducted in a manner consistent with that level of care and skill ordinarily exercised by other members of the engineering and science professions currently practicing under similar conditions subject to the time limits and financial, physical, or any other constraints applicable to the Services. No warranty, express or implied, is made. 20 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal CRW Engineering Group, LLC Page 4 of 5 Standard Terms and Conditions (11/6/16) 10. INSURANCE AND INDEMNITY CRW maintains General Liability Insurance for bodily injury and property damage with an aggregate limit of $1,000,000 per occurrence and we will furnish certificates of such insurance upon request. Our liability to the CLIENT for bodily injury or property damage arising out of work performed for the CLIENT for which legal liability may be found to rest upon us, other than the professional errors and omissions, will be limited to our General Liability insurance coverage. CLIENT shall, at all times, defend, indemnify, and save harmless CRW and its subcontractors, consultants, agents, officers, directors, members and employees from and against all claims, damages, losses, and expenses, including but not limited to reasonable attorneys’ fees, court and arbitration costs, arising out of or resulting from the Services of CRW, inclusive of claims made by third parties, or any claims against CRW arising from the acts, errors, or omissions of CLIENT, its employees, agents, contractors, and subcontractors. Such indemnification shall not apply to the extent such claims, damages, losses, or expenses are finally determined to result from CRW’s negligence. CRW shall, at all times, indemnify and save harmless CLIENT and its officers, directors, agents, and employees from and against all claims, damages, losses, and expenses arising from personal injury, death, or damage to third-party property to the extent directly attributable to the negligent acts, errors, or omissions of CRW. 11. LIMITATION OF LIABILITY Our findings, recommendations, speci- fications, or professional opinions will be presented, within the limits prescribed by the CLIENT, after being prepared in accordance with generally accepted professional engineering practice. We make no other warranty, either express or implied. For any injury or loss on account of any error, omission, or other professional negligence, the CLIENT agrees to limit CRW and/or its professional employees' liability to the CLIENT and to all agents, contractors, and subcontractors arising out of the performance of our professional services, such that the total aggregate liability to all those named shall not exceed $50,000 or our fee, whichever is greater. In the event the CLIENT does not wish to limit our professional liability to this sum, we will waive this limitation upon the CLIENT's written request made at the time of the initial authorization, on a given project, provided that the CLIENT agrees to pay an additional 5% of our total fee or $500, whichever is greater. However, the CLIENT agrees that our maximum liability will be limited to our Professional Liability Insurance coverage. In the event the CLIENT makes a claim against CRW and/or its professional employees, at law or otherwise, for any alleged error, omission, or other act arising out of the performance of our professional services, and the CLIENT fails to prove such claim or prevail in and adversary proceeding, the CLIENT shall pay all costs incurred by CRW and/or its professional staff in defending itself against the claim. Neither party shall be responsible to the other for lost revenues, lost profits, cost of capital, claims of customers, or other special, indirect, consequential, or punitive damages. 12. DISPUTES All disputes, claims, and causes one party makes against the other, at law or otherwise, including third party or “pass-through” claims for indemnification and/or contribution, shall be initiated, determined, and resolved by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any court having jurisdiction thereof. 21 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal CRW Engineering Group, LLC Page 5 of 5 Standard Terms and Conditions (11/6/16) In the event that one party makes a claim against the other, at law or otherwise, and then fails to prove such claim, then the prevailing party shall be entitled to all costs, including attorneys’ fees incurred in defending against the claim. 13. CLIENT LITIGATION If CRW is requested to produce documents, witnesses, or general assistance pursuant to a litigation, arbitration, or mediation in support of CLIENT litigation to which CRW is not an adverse party, CLIENT shall reimburse CRW for all direct expenses and time in accordance with CRW’s current rate schedule. 14. MISCELLANEOUS a) This Agreement supersedes all other agreements, oral or written, and contains the entire agreement of the parties. No cancellation, modification, amendment, deletion, addition, waiver, or other change in this Agreement shall have effect unless specifically set forth in writing signed by the party to be bound thereby. Titles in this Agreement are for convenience only. b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns provided that it may not be assigned by either party without consent of the other. It is expressly intended and agreed that no third party beneficiaries are created by this Agreement, and that the rights and remedies provided herein shall inure only to the benefit of the parties to this Agreement. c) No waiver of any right or remedy in respect of any occurrence on one occasion shall be deemed a waiver of such right or remedy in respect of such occurrence on any other occasion. d) All representations and obligations (including without limitation the obligation of CLIENT to indemnify CRW in Article 10 and the Limitation of Liability in Article 11) shall survive indefinitely the termination of the Agreement. e) Any provision, to the extent it is found to be unlawful or unenforceable, shall be stricken without affecting any other provision of the Agreement, so that the Agreement will be deemed to be a valid and binding agreement enforceable in accordance with its terms. 15. NOTICES All notices required or permitted to be given hereunder, shall be deemed to be properly given if delivered in writing by hand, facsimile machine, e-mail, or express courier addressed to CLIENT or CRW, as the case may be, at the addresses set forth below, with postage thereon fully prepaid if sent by mail or express courier. All notices, correspondence, deliverables, and invoices shall be submitted to CLIENT as indicated in the signed letter agreement unless otherwise indicated below: ___________________________________ ___________________________________ ___________________________________ Attn: _______________________________ All Notices and correspondence shall be submitted to CRW as indicated below: CRW Engineering Group, LLC 3940 Arctic Boulevard, Suite 300 Anchorage, Alaska 99503 Attn: D. Michael Rabe, PE, Member Manager 22 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Scope of Work for DeerStone Consulting Contribution to Mary’s Igloo and Kawerak Proposal to BIA TEDC Grant Program DeerStone Consulting will work with all project participants and stakeholders, led by Mary’s Igloo Traditional Council (MITC) and Kawerak, Inc., to assist in the following tasks and deliverables: • Conduct a Feasibility Study to determine an appropriate business structure and define development options for Unaatuq, LLC. to optimize and manage the locally available energy resources—including possibly geothermal, solar, biomass, hydropower, and wind—for a sustainable economy and business foundation for Pilgrim Hot Springs. • Perform an Economic Analysis of the income potential and requirements for an energy provider as well as a load analysis for various prospective businesses and enterprises based on development scenarios identified by project participants and stakeholders. • Facilitate a Strategic Planning Session with Unaatuq Board members to define scenarios and energy development options for Pilgrim Hot Springs and more broadly for the Kawerak/Norton Sound region. Assumptions 1. DeerStone Consulting team includes Brian Hirsch, Devany Plentovich, Tashina Duttle, Alan Mitchell, and Peter Crimp. 2. DeerStone will work closely with designated staff from MITC and Kawerak. Amanda Toerdal or her delegate will be primary Point of Contact for MITC and Kawerak and Brian Hirsch or his delegate will be primary Point of Contact for DeerStone. 3. The Economic Analysis will be a stand-alone activity but will be included as a major component of the broader Feasibility Study. The Economic Analysis will primarily be a techno-economic optimization of various energy options designed to meet different load profiles based on expected business activity at Pilgrim Hot Springs. The Feasibility Study will incorporate the Economic Analysis and Strategic Planning outputs into a much broader review of development pathways, approaches, institutional considerations, and overall strategies to support goal- and value-driven development of Pilgrim Hot Springs to serve as a role model for the region. 4. All Unaatuq partners will strive to have at least one representative available for the Strategic Planning Session, which will take place in Nome, Alaska, as travel restrictions allow, including a site tour of Pilgrim Hot Springs. 5. The Strategic Planning Session will be for 2 days in-person (if possible, or 1 day if virtual), and will require 1-2 person-days of preparation and 1-2 person-days of follow-up from DeerStone (depending on if in-person or virtual), including a write-up of the event, follow up next steps, and outreach support to participants before and after. 23 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal List of Bering Strait Tribes Chinik Eskimo Community (aka Golovin) King Island Native Community Native Village of Brevig Mission Native Village of Council Native Village of Diomede (aka Inalik) Native Village of Elim Native Village of Gambell Native Village of Koyuk Native Village of Mary’s Igloo Native Village of Saint Michael Native Village of Savoonga Native Village of Shaktoolik Native Village of Shishmaref Native Village of Teller Native Village of Unalakleet Native Village of Wales Native Village of White Mountain Nome Eskimo Community Stebbins Community Association Village of Solomon 24 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal 2020 KAWERAK, INC. Organizational Chart NATURAL RESOURCES DIVISION Kawerak President Kawerak Natural Resources Committee Executive Vice President Vice President Natural Resources Administrative Assistant Land Management Services Program Director Eskimo Walrus Commission Director Eskimo Walrus Commission Reindeer Herders Association Subsistence Resources Director Special Projects Assistant Land Management Specialist I Land Management Specialist II (2) Revised: 8/2020 Natural Resources Specialist Social Science Program Director Ice Seal Committee, Northern Norton Sound Advisory Committee, SPSRAC Local Assistant II (Nome) Social Science Research Assistant Natural Resources Advocate Probate Specialist II AYKSSI Steering Committee, NPFMC Ecosystem Committee, WASC Representative, WALCC Steering Committee Marine Mammal Commission, ICC Alaska Board and Executive Committee, AK Seagrant Advisory Member, Arctic Marine Mammal Commission, Arctic Waterway Safety Committee, IPCOMM Member FSB Tribal Consultation Committee * Kawerak Board Committee * NR programs serve as support staff * NR staff serve on these boards or committees Color Key: Society for the Anthropology of Consciousness Environmental Program Director Environmental Assistant Brownfields Coordinator Village IGAP Programs Probate Specialist I Local Assistants I (Villages) Bering Strait/Norton Sound Migratory Bird Council, Alaska Migratory Bird Co-management Council Emergency Preparedness Specialist Energy Development Specialist Marine Advocate Pilgrim Hot Springs General Manager & Caretaker25 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal 26 of 101Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration at Pilgrim Hot Springs 2010 to 2014: Final Report Prepared by the Alaska Center for Energy and Power at the University of Alaska Fairbanks 27 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal i Acknowledgments Activities described in this report were made possible with funding from a variety of federal, state, local, private and tribal sources including the U.S. Department of Energy under DE- EE0002846, “Validation of Innovative Exploration Techniques, Pilgrim Hot Springs, Alaska” and DE-EE0000263, “Southwest Alaska Regional Geothermal Energy Project, Pilgrim Hot Springs, Alaska,” The Alaska Energy Authority through RSA R1108 and R1215, the City of Nome, Bering Straits Native Corporation, White Mountain Native Corporation, Sitnasuak Native Corporation, Potelco, Inc., and the Norton Sound Economic Development Corporation. The geothermal exploration described in this report required a significant amount of planning and organization, and would not have been possible without the generous support from numerous individuals and organizations. The importance of local people and groups on the Seward Peninsula to this project’s success cannot be overstated. The employees of Bering Straits Native Corporation were generous with never-ending useful snippets of local knowledge as well as logistical support, in addition to the monetary support already described. Assistance from Robert Bensin, Kevin Bahnke, Larry Pederson, Matt Ganley, and Jerald Brown was indispensable and deserves special mention. The support of staff from the Norton Sound Economic Development Corporation and the City of Nome, especially John Handeland of the Nome Joint Utility Service and Mayor Denise Michels, were instrumental in overcoming logistical and funding challenges. Unaatuq, LLC and its board of directors have continued to have the vision required to keep the project moving forward. Unaatuq board member Roy Ashenfelter provided logistical support and boat transport up and down the Pilgrim River. Mary’s Igloo Native Corporation, whose land abuts the hot spring property was an important project partner and allowed land access for project activities. Mary’s Igloo Native Corporation tribal member Dora Mae Hughes and her family members provided important cultural background and shared stories about the regional history. Louis Green Sr. willingly shared his knowledge of the Pilgrim Hot Springs site and its history and provided logistical support. Chuck Fagerstrom freely shared his knowledge and was always willing to share site history and stories. Bryant Hammond and Amy Russell from Kawerak provided additional local support. University of Alaska faculty member Dr. Catherine Hanks assisted with technical editing and offered her expertise on the geology of the Seward Peninsula. Joe Batir and others from Southern Methodist University assisted with well logging and allowed ACEP to use high quality geothermal logging equipment. Jo Price and Graphite One Resources willingly shared data that they acquired to assist with the development of a regional geothermal understanding. In addition, former University of Alaska faculty members Dr. Ronald Daanen and Jo Mongraine were heavily involved and instrumental in project planning and data collection. The staff of the U.S. Geologic Survey (USGS) assisted in a variety of ways. Art Clark and the USGS drilling team made the initial stages of the project possible. John Glen and his crew accomplished an extensive set of geophysical surveys and interpretations and provided technical assistance at various stages of the project. The University of Alaska Fairbanks Geophysical Institute including Anupma Prakash, Christian Haselwimmer and Jeff Benowitz and graduate students Josh Miller and Arvind Chittambakkam 28 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal ii worked tirelessly to complete the remote sensing and conceptual modeling, adding an important piece to the body of knowledge about Pilgrim Hot Springs. Ryan Purcella of Baker Hughes and Mark Kumataka provided valuable engineering guidance related to well pumping and flow testing. Additional technical assistance was provided by Bill Cummings, and Dr. Dave Blackwell. Cheryl Thompson, collections assistant at the Carrie M. McLain Memorial Museum in Nome, was extremely helpful, providing assistance with historical research and obtaining historic photos. Ethan Berkowitz assisted with organizing and maintaining positive momentum during the final round of drilling and Howard Trott contributed his time and supplied equipment used in the flow testing. Joel Renner and Fran Pedersen spent long hours on a technical review of this report for which we are very grateful. A special thank you goes out to Dick Benoit who provided endless advice and technical assistance and who was always willing to answer his phone when we called. 29 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal iii Table of Contents Acknowledgments ....................................................................................................................... i List of Figures ............................................................................................................................. v List of Tables ............................................................................................................................. vi Terms and Acronyms ................................................................................................................ vii 1. EXECUTIVE SUMMARY .................................................................................................... 1 2. BACKGROUND – KRUZGAMEPA HOT SPRINGS .......................................................... 2 2.1 Geothermal Exploration History ....................................................................................... 4 3. GEOLOGIC SETTING .......................................................................................................... 6 3.1 Regional Geologic Setting ................................................................................................ 6 3.2 Local Geology ................................................................................................................... 8 4. SUBSURFACE TEMPERATURES ...................................................................................... 8 4.1 Updated Temperature Logging ....................................................................................... 11 5. REMOTE SENSING ............................................................................................................ 14 5.1 Satellite-based Geothermal Anomaly Mapping .............................................................. 15 5.2 Airborne Forward Looking Infrared Surveys ................................................................. 17 6. GEOPHYSICAL SURVEYS ............................................................................................... 27 6.1 Gravity Surveys .............................................................................................................. 28 6.2 Airborne Magnetic and Electromagnetic Surveys .......................................................... 29 6.3 Magnetotellurics Survey ................................................................................................. 31 7. DRILLING ACTIVITIES ..................................................................................................... 35 7.1 Permitting ........................................................................................................................ 36 7.2 Legacy Wellhead Repairs ............................................................................................... 36 7.3 Shallow Temperature Survey .......................................................................................... 37 7.4 Deep Drilling .................................................................................................................. 40 8. WATER CHEMISTRY ........................................................................................................ 42 9. FLOW AND INTERFERENCE TESTING ......................................................................... 44 9.1 Interference Testing of Wells PS-3, PS-4, and MI-1 ...................................................... 45 9.2 Interference Testing of PS-3, PS-13-1, and PS-13-3 ...................................................... 46 9.3 Flow Testing of PS-13-1 ................................................................................................. 46 9.4 Temperature and Pressure Monitoring in PS-13-2 ......................................................... 52 9.5 Temperature and Pressure Monitoring in PS-13-3 ......................................................... 52 9.6 Historic Hot Springs Temperature Monitoring ............................................................... 54 9.7 Flow Testing Conclusions .............................................................................................. 55 30 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal iv 10. PILGRIM GEOTHERMAL SYSTEM CONCEPTUAL MODEL .................................... 56 10.1 Conceptual Model History ............................................................................................ 56 10.2 Current Pilgrim Geothermal System Understanding .................................................... 61 11. EXPORTING GEOTHERMAL ENERGY TO NOME ..................................................... 64 11.1 Geothermal Power Economics ...................................................................................... 64 11.2 Wind-Diesel-Geothermal Microgrid Modeling ............................................................ 64 11.3 Transmission from Pilgrim Hot Springs to Nome ........................................................ 65 12. LESSONS LEARNED ....................................................................................................... 65 13. CONCLUSIONS ................................................................................................................ 66 14. REFERENCES ................................................................................................................... 68 APPENDICES APPENDIX A Well Schematics APPENDIX B Well Temperature Profiles APPENDIX C Well Locations and Descriptions APPENDIX D Wellhead Repair Description APPENDIX E Geophysical Survey Report APPENDIX F 2012 Mud Logging Records APPENDIX G Geophysical Well Logs for 2011 and 2012 Drilling APPENDIX H September 2013 Interference Testing APPENDIX I February 2014 Interference Testing APPENDIX J 2012 Drilling Logs APPENDIX K 2013 Geophysical Logs APPENDIX L Fugro MT Report APPENDIX M A Conceptual Model of Pilgrim Hot Springs: Joshua Miller Master Thesis APPENDIX N Reservoir Simulation Modeling: Arvind Chittambakkam Thesis APPENDIX O Tectono-thermal History of Pilgrim Hot Springs, Alaska APPENDIX P Wind-Geothermal-Diesel Microgrid Development: Jeremy VanderMeer Thesis APPENDIX Q Fuel Oil Volatility – Complications for Evaluating a Proposed Power Purchase Agreement for Renewable Energy in Nome, Alaska APPENDIX R High Voltage Direct Current Transmission Assessment at Pilgrim Hot Springs APPENDIX S Wind-Geothermal-Diesel Microgrid Development 31 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal v List of Figures Figure 1. The location of Pilgrim Hot Springs on the Seward Peninsula. ...................................... 2 Figure 2. Index maps showing the topography and regional geology. ........................................... 6 Figure 3. Topographic map of the area surrounding Pilgrim Hot Springs, .................................... 7 Figure 4. Map of all drill holes and well locations ....................................................................... 10 Figure 5. The1982 temperature logs from the original wells ........................................................ 11 Figure 6. Temperature profiles of all holes and wells .................................................................. 12 Figure 7. Map showing the approximate margin of the very shallow thermal aquifer ................. 13 Figure 8. Plan view temperature maps of Pilgrim Hot Springs .................................................... 14 Figure 9. A time series of ASTER visible to near-infrared imagery ............................................ 16 Figure 10. A subset of an ASTER wintertime false color composite image ................................ 16 Figure 11. Landsat 7 satellite images of the Pilgrim Hot Springs ................................................ 17 Figure 12. Low-emissivity thermal blankets ................................................................................ 18 Figure 13. Field calibration and validation data sites for the primary target area ........................ 19 Figure 14. Comparison of a FLIR-derived temperatures profile .................................................. 19 Figure 15. Mosaicked FLIR surface temperature data.................................................................. 20 Figure 16. FLIR (left) and optical data (right) from the fall 2010 survey .................................... 21 Figure 17. Processed airborne images for parts of the study area ................................................ 22 Figure 18. A simplified conceptual model of the Pilgrim geothermal system ............................. 23 Figure 19. A total surface energy budget model for the Pilgrim geothermal system ................... 24 Figure 20. The effect of wind speed on heat flux ......................................................................... 27 Figure 21. Gravity stations are labeled on a topographic map ..................................................... 28 Figure 22. Isostatic residual gravity map ...................................................................................... 29 Figure 23. Magnetic field maps from Glen et al. (2014) .............................................................. 30 Figure 24. Magnetic lineations interpreted from maximum horizontal gradients ........................ 30 Figure 25. Airborne EM resistivity slices ..................................................................................... 31 Figure 26. Magnetotellurics site locations. ................................................................................... 32 Figure 27. Resistivity at Profile D from a 1D MT inversion. ....................................................... 32 Figure 28. Resistivity maps at 25 m and 50 m from the blind 3D MT inversion. ........................ 33 Figure 29. Resistivity maps at 100 m, 150 m, 200 m, and 300 m ................................................ 34 Figure 30. Resistivity maps at 400 m, 500 m, 750 m, and 1000 m .............................................. 35 Figure 31. Areas of leaking, scale, and corrosion are shown on PS-4. ......................................... 37 Figure 32. The PS-4 completed replacement valve installation. .................................................. 37 Figure 33. Installing Geoprobe holes at Pilgrim Hot Springs. ...................................................... 38 Figure 34. Location of Geoprobe holes and their temperatures in Fahrenheit at 60 feet. ............ 39 Figure 35. The temperature logs from all Geoprobe holes ........................................................... 40 Figure 36. The mixing trend between sodium and chloride is shown for all samples .................. 43 Figure 37. Chloride content is shown along with well temperature ............................................. 44 Figure 38. PS-3 downhole pressure during interference testing. .................................................. 45 Figure 39. PS-3 temperature response during 2013 interference testing. ..................................... 46 Figure 40. Surface equipment used for the airlift of PS-13-1 ....................................................... 47 Figure 41. Downhole pressure and temperature record of PS-13-1 .............................................. 49 Figure 42. PS-13-1 downhole pressure and temperature .............................................................. 49 Figure 43. Downhole pressure and temperature at the end of the second airlift .......................... 50 Figure 44. Detailed flowing and static logs from PS-13-1 ........................................................... 51 Figure 45. PS-13-2 pressure and temperature response during PS-13-1 flow testing. ................. 53 32 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal vi Figure 46. PS-13-3 pressure and temperature response during PS-13-1 flow testing. ................. 53 Figure 47. The historic hot spring pool ......................................................................................... 54 Figure 48. Hot spring pool temperatures during the September 2014 flow testing ...................... 55 Figure 49. Conceptual model from Miller et al. (2013a). ............................................................. 58 Figure 50. Regional conceptual model cartoon from Glen et al. (2014). ..................................... 59 Figure 51. The current conceptual model of Pilgrim Hot Springs ................................................ 63 List of Tables Table 1. FLIR heat flux estimates. ................................................................................................ 26 Table 2. Permits and approvals ..................................................................................................... 36 Table 3. Pilgrim Hot Springs well chemistry in PPM .................................................................. 42 Table 4. Well productivity data .................................................................................................... 52 33 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal vii Terms and Acronyms ACEP Alaska Center for Energy and Power ASTER Advanced Spaceborne Thermal Emission and Reflection Radiometer DOE U.S. Department of Energy NETL National Energy Technology Lab EM Electromagnetic ETM+ Enhanced Thematic Mapper FLIR Forward looking infrared radiometry gpm Gallons per minute IGRF International Geomagnetic Reference Field Kauweraq The region of the central Seward Peninsula (also spelled Kawerak) MHG Maximum horizontal gradient MT Magnetotellurics MWe Megawatt electric MWth Megawatt thermal PGS Pilgrim Geothermal System PHS Pilgrim Hot Springs SMU Southern Methodist University TG Temperature gradient UAF University of Alaska Fairbanks Unaatuq Inupiaq word (also spelled Oonuktuak) meaning hot water/ hot spring. Also refers to the group of Native Alaskan and non-profit organizations that own Pilgrim Hot Springs. USGS United States Geological Survey VNIR Visible and near-infrared 34 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 1 1. EXECUTIVE SUMMARY This document is the final report for the Pilgrim Hot Springs (PHS) geothermal exploration project, funded by the U.S. Department of Energy (DOE), The Alaska Energy Authority, the City of Nome, Bering Straits Native Corporation, White Mountain Native Corporation, Sitnasuak Native Corporation, Potelco, Inc., and the Norton Sound Economic Development Corparation. The first round of funding in 2009 was awarded under Alaska Energy Authority RSA R1108 and R1215 and DOE award DE-EE0002846. In 2013, DOE award DE-EE0000263 along with match money from the six other organizations listed above was awarded. This report details the activities that occurred as part of the first and second rounds of funding for geothermal exploration at PHS in 2010 and 2013. The project objectives were to test innovative geothermal exploration techniques for low-to-moderate-temperature geothermal resources and conduct resource evaluations of PHS. A variety of methods including geophysical surveys, remote sensing techniques, and heat budget modeling estimated that the geothermal resource might support electrical power generation of approximately 2 MWe using a binary power plant. Further flow testing of the deep geothermal aquifer is needed to verify this estimate. Eight new wells were drilled around the PHS site to a maximum depth of 1294 feet. Five of these wells use sealed casing and can be used only to collect temperature logs. The other three wells have perforated casing and are capable of measuring temperature as well as artesian flow. A maximum temperature of 91°C (196°F) was measured in two different wells: in the shallow thermal aquifer at approximately 120 feet in depth and in the deep aquifer at approximately 1100 feet in depth. These wells were drilled in what is believed to be the vicinity of the upwelling zone, but both wells show a temperature reversal between the shallow and deep thermal aquifers, suggesting they are not directly over the main area of upwelling. Based on data collected to date, the main upwelling zone is likely northwest of well PS-13-1 in a swampy area that has been inaccessible for drilling. As in past surveys, geothermometry from water samples collected suggests maximum system temperatures could be as high as 145°C (293°F), based on Na-K-Ca geothermometry. The most concentrated geothermal fluid with 3500 ppm (parts per million) chloride continues to be collected from the traditional thermal hot spring located directly south of the church. Thermochronology data analyzed by University of Alaska Fairbanks (UAF) researchers suggest that the Pilgrim geothermal system (PGS) is relatively young, and core samples collected from the drilling indicate that temperatures have likely reached approximately 150°C (302°F) in the past 1000 years. In 2014, a power purchase agreement was signed between the City of Nome and Pilgrim Geothermal LLC, who has sent a letter of intent to the landowners to develop the resource. Modeling by the UAF power integration program, examined the effect of adding a geothermal generation source to the existing wind-diesel islanded grid in Nome. Adding 2 MW of geothermal power to the Nome grid displaces approximately 1 million gallons of diesel fuel per year (VanderMeer and Mueller-Stoffels, 2014). 35 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 2 Flow testing of the shallow thermal aquifer reached maximum flow rates of 350 gpm (gallons per minute), and sustained flow rates of 300 gpm for 7.5 hours. Based on the observed flow rates and minimum pressure decline, it appears likely that the shallow thermal aquifer could sustain this flow long term, opening up the potential for on-site direct geothermal heating or electrical power generation. 2. BACKGROUND – KRUZGAMEPA HOT SPRINGS Pilgrim Hot Springs, formerly known as Kruzgamepa Hot Springs, is located on Alaska’s Seward Peninsula about 60 miles north of Nome and 75 miles south of the Arctic Circle (Figure 1). The site has a long, colorful human history, which has included use as a traditional Native Alaskan gathering place, a farm, a dancehall and roadhouse, a Catholic orphanage and mission, and most recently as a recreational bathing and hunting site. The lush and tall local vegetation, dominated by cottonwood trees, contrasts with the otherwise treeless tundra of the western Seward Peninsula and is visible from miles away. Since the late 1970s, the area has seen two extensive geothermal exploration efforts that have extended road access to the site from the Nome-Taylor Highway. Before outsiders came to the region, the people of Kauweraq (the region of the central Seward Peninsula) used the area known as Oonuktuak (also spelled Unaatuq), also known as Kruzgamepa and later as Pilgrim Hot Springs. Traditionally, the hunting camp served as a Figure 1. The location of Pilgrim Hot Springs on the Seward Peninsula. 36 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 3 tropical oasis for the Kauweramuit (the people of Kauweraq) (D. Hughes, personal communication, February 17, 2015). During the winter months, Oonuktuak was an ideal living area with fresh water, plenty of wood for heat, and bountiful hunting and fishing. After successful ceremonial caribou hunts, other native groups such as the King Islanders would visit the area (Ray, 1992). Pressure from commercial whaling and hunting significantly reduced the marine mammal population in the region, and local government officials became concerned about the well-being of the region’s native inhabitants. In 1892, reindeer from northeastern Siberia were first introduced, after Dr. Sheldon Jackson, the Commissioner of Education in Alaska, received congressional approval. A reindeer station was established at Teller, about 40 miles west of the hot springs (Bucki, 2004). Later reindeer fairs were held, the first of which took place in 1915 at Pilgrim Hot Springs (Van Stone et al., 2000). Modern development at the hot springs began around the year 1900, during the Nome Gold Rush, when a family homesteaded 160 acres and worked the land, raising cows, chickens, pigs, and horses (Bland, 1972). After several years, the land was leased or sold to a series of people who developed a roadhouse. During the gold rush period, a bathhouse, greenhouse, roadhouse (hotel), and stables were built on the site. The facilities were frequented by the miners, their “fancy ladies,” and gamblers who reached the area by dog team. A railroad once passed within 8 miles of the site. In 1908, the roadhouse and saloon-dancehall burned to the ground. By this time, the gold rush was ebbing and a second roadhouse was constructed to serve travelers (National Register of Historic Places, 1977). By the late 1910s, mining on the Seward Peninsula had greatly diminished, and eventually, after another series of transactions, the land was deeded to the Catholic Church by two brothers with no heirs. In 1917 and 1918, an influenza epidemic decimated the area’s Native Alaskan adult population. On April 22, 1918, a Canadian priest and pastor of a Nome church, Father Bellarmine Lafortune, S.J, moved out to the hot springs to build an orphanage (The Alaskan Shepherd, 2009). Many buildings were moved from a mission that existed in the village of Mary’s Igloo, several miles north of the hot springs, to the present-day site. Additional buildings were constructed using lumber from a nearby mining site as well as the on-site timber (National Register of Historic Places, 1977). During this time, the site became known as Pilgrim Hot Springs (PHS). Eventually the orphanage included a machine shop, student dormitories, nun and priest quarters, a sizable church that now dominates the site, a variety of lesser buildings, a cemetery, and reportedly an unmarked or lost burial ground where victims of the Spanish influenza outbreak were interred. Some of the buildings were reportedly heated with the natural springs; others were heated using wood stoves. Historic photos show huge piles of firewood stacked near the church and a substantial treeless area around the springs, now heavily wooded. Toward the latter stages of the orphanage, firewood became scarce in the region (The Alaskan Shepherd, 2009). The orphanage was largely self-sustaining thanks to the gardens that flourished on the permafrost- free soil, producing legendary crops of potatoes, cabbages, turnips, and other vegetables. The population averaged about 100 youth and 20 adults then (National Register of Historic Places, 1977). A field of shoulder-high oats was growing in the thawed area in September 1915 (Waring, 1917). The orphanage closed in 1941; however, caretakers continued to grow produce, and up to 37 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 4 7 airplane flights a day ferried this produce to Nome (Bland, 1972), as there was no road access at the time. During World War II, military forces used the site for rest and recreational purposes. In 1969, Pilgrim Springs Ltd. signed a 99-year lease on the property with the Catholic Church to develop the site as a historical resort (Bland, 1972). This plan never materialized, but the land continued to be farmed by a number of caretakers. In 2010, Unaatuq LLC, a consortium of Alaska Native and nonprofit entities from the Seward Peninsula, purchased the property and decaying buildings for $1.9 million from the Fairbanks Catholic Diocese after the Diocese filed for Chapter 11 bankruptcy (Smetzer, 2010). Since acquiring the property, Unaatuq has been investigating various options for the development and preservation of the site. Throughout the site’s history, it has continuously been used for bathing and recreational purposes. 2.1 Geothermal Exploration History The first recorded description and map of the hot springs dates from 1915, after the local area had already seen significant development (Waring, 1917). Waring apparently reached the site via light carts pulled by dog teams on the old railroad grade that passed 8 miles east of the hot springs. Waring described a permafrost-free area 100 yards wide and a half-mile long, and measured a maximum spring temperature of 156°F. The visible single-point discharge in 1915 was only about 8 gpm, but additional diffuse discharge increased this amount to an estimated 60 gpm. The water was reported clear with a slight hydrogen sulfide odor. Waring collected a thermal water sample for chemical analysis. This analysis, now a century old, is remarkably similar to modern analyses of the thermal water (Table 3). In 1968, the Catholic Church leased the geothermal rights to C. J. Phillips of Nome (Kirkwood, 1979). However, no significant exploratory work occurred under this lease, which ultimately was revoked. The U.S. Geological Survey (USGS) designated the hot springs as a Known Geothermal Resource Area in the 1970s. In the early 1970s, initial evaluation of the geothermal resource commenced. The USGS revisited some of the thermal springs in central and western Alaska and published a new chemical analysis of the PHS thermal water (Miller et al., 1975). The quartz and Na-K-4/3Ca geothermometers from this analysis predicted subsurface hot springs temperatures of 137°C and 120°C. In October 1973, Harding-Lawson Associates ran two resistivity lines and concluded that a fault crossed the area and down-dropped bedrock from a depth of 100 feet to 600 feet (Kirkwood, 1979). In 1974, a 2250-foot-long north–south seismic refraction line and surface magnetic profile were run (Forbes et al., 1975). Forbes et al. measured a maximum temperature of 80°C in the thermal pool and deployed a portable seismograph for two nights to try to detect any tremors. They found the area quiet. The first major geothermal studies at PHS were led by the Geophysical Institute at the University of Alaska, the Alaska Division of Geological and Geophysical Survey, and the State Division of Energy and Power Development in 1979, using funding from the Alaska Division of Energy and Power and the U.S. Department of Energy. During the 45-day field season, a variety of geological, geochemical, geophysical, hydrological, and shallow drilling studies were performed at the site (Turner and Forbes, 1980). In the fall of 1979, the first two wells at PHS were drilled 38 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 5 to a maximum depth of 160 feet and initially flowed, allowing the first analysis of subsurface thermal water (Kline et al., 1980). During a 30-day field season in 1980, the central Seward Peninsula was evaluated on a more regional scale for its geothermal potential (Wescott and Turner, 1981). This helicopter-supported work included geologic, geophysical, and geochemical studies near PHS. It also incorporated a remote sensing component (Dean et al., 1982). In 1982, a 7-mile-long road was at last constructed from the Nome-Taylor Highway to Pilgrim Hot Springs, allowing reasonable access for a drilling rig and associated equipment capable of drilling larger-diameter and deeper wells (P. Eagan, personal communication, April 29, 2015). During summer 1982, four wells were drilled to a maximum depth of 1001 feet (Kunze and Lofgren, 1983; Lofgren, 1983). These wells were flowed, brief interference tests were conducted, and chemical analyses were obtained (Economides, 1982; Economides et al., 1982). This work represented the end of the first major exploration effort at PHS, as the maximum measured well temperature of 91°C was far too low for electrical power generation with the technology that existed at the time. Pilgrim Hot Springs attracted very little geothermal interest between 1983 and the early 2000s, with the exception of a comprehensive water and gas sampling program conducted in 1993 (Liss and Motyka, 1994). In the early 2000s, interest in the PGS gradually revived with the National Renewable Energy Laboratory sponsoring a site visit (Huttrer, 2002) and the Alaska Energy Authority funding a preliminary development feasibility study (Dilley, 2007). In 2008, the Nome Region Energy Assessment concluded that geothermal energy was a potentially economic option for the region (Sheets et al., 2008). In 2006, the first geothermal power plant in Alaska was installed at Chena Hot Springs, near Fairbanks. The project was able to generate electricity using 165°F (73°C) fluid, effectively making it the lowest temperature geothermal power plant in the world and demonstrating that generating electricity from low temperature geothermal resources was technically and economically feasible (Holdmann, 2007). Following this success, overall interest in developing Alaska’s low-to-moderate temperature resources increased, and the Alaska Center for Energy and Power (ACEP) secured grant funding from the U.S. Department of Energy and the Alaska Energy Authority to resume exploration of the PGS. This work began in 2010, with repairs to the existing wellheads so that those wells could be relogged and flow tested. Remote sensing studies also began at this time (Haselwimmer et al., 2011), followed by numerical modeling of existing data (Daanen et al., 2012). The USGS also collected additional geophysical data around the hot springs (Glen et al., 2012). In 2011, two 500-foot temperature gradient holes were drilled to evaluate the northern part of the thermal anomaly where the thermal upwelling was then expected to be located. In 2012, three deep holes were drilled in an attempt to precisely define the location of the thermal upwelling beneath the shallow thermal anomaly (Miller et al., 2013a; Miller et al., 2013b; Benoit et al., 2014a). Recent modeling efforts used data from the deep holes drilled in 2012 (Chittambakkam et al., 2013). In 2013, additional funding became available through the U.S. Department of Energy. ACEP drilled a deep, large-diameter well and two shallower wells 39 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 6 to locate and produce fluid directly from the deep thermal upwelling (Benoit et al., 2014b). These holes failed to penetrate or precisely locate the thermal upwelling, but were completed as possible future production wells for direct-use projects. In September 2014, these three wells were flow tested and monitored for interference. 3. GEOLOGIC SETTING 3.1 Regional Geologic Setting The central Seward Peninsula is underlain by a Precambrian metamorphic complex, intruded by Cretaceous granitic rocks (Amato and Miller, 2004; Till et al., 2011). In the vicinity of Pilgrim Hot Springs (PHS), Quaternary alluvial fill overlies this basement complex. The metamorphic and intrusive rocks are well exposed in the Kigluaik Mountains 2.5 miles south of the PGS and on Mary’s Mountain and Hen and Chickens Mountain 2.5 miles north of the hot springs (Figure 2). Nowhere is the alluvial fill dissected to the point that any meaningful thickness can be viewed in any detail at the surface. The dominant regional structural feature near PHS is the east–west trending Kigluaik- Bendeleben system of normal faults. These normal faults are interpreted as due to regional north- south extension (Ruppert, 2008), which led Wescott and Turner (1981) to propose that the central part of the Seward Peninsula is a 250 km long east-west striking rift system. The Kigluaik section of the fault system uplifts the Kigluaik Mountains in the south relative to the Imuruk Basin in the north, where the hot springs are located. Hudson and Plafker (1978) divided the Kigluaik section of the fault system into three segments. The western and central section’s show clear surface traces and post Wisconsin or Holocene vertical displacements up to 10 m. The eastern section, which passes about 2.5 miles south of PHS, has less definable surface traces, being more obscured by glacial deposits (Hudson and Plafker, 1978). The eastern section is more complex, with two distinct northward steps, giving Figure 2. Index maps showing the topography and regional geology.The red box in the left panel shows the area in the geologic map on right. The location of Pilgrim Hot Springs is shown by the red star. Map after Till et al. (2011). The red box in the right panel outlines the area of Figure 3. 40 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 7 the range front an en echelon system of at least three mappable faults. Geomorphic features suggest that displacement of the western en echelon section is younger than displacement of the eastern section. The vertical displacement on the Kigluaik fault zone is at least several hundred meters and probably exceeds 1200 m. While it is tempting to hypothesize that this major extensional structure somehow plays a role in the geothermal system, no serious arguments for this have yet been made. Up to 320 m of Quaternary alluvium ranging from clay to gravel in size and consisting of alluvial, fluvial, glaciolacustrine, and brackish lagoon sediments has been drilled in the immediate vicinity of PHS (Miller et al., 2013a, 2013b). The volcanic rocks closest to the PGS are the Holocene Lost Jim basaltic lava flows (Till et al., 2011). These flows cover 88 square miles and lie about 30 miles northeast of the PGS. They are outside of the boundary of Figure 2. This distance from the PGS makes it unlikely that the Lost Jim lava flows represent a possible direct magmatic heat source for the PGS. The northern horn of the Seward Peninsula also hosts the world’s largest maar craters, dated at 21,000 years (Rozell, 2006), but these craters are much farther away. If there is a magmatic heat source for the PGS, no author has yet tried to make a convincing case for its existence Figure 3. Topographic map of the area surrounding Pilgrim Hot Springs, indicated by the red star. 41 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 8 3.2 Local Geology The localized surficial geology surrounding the PGS consists of a flat, wide valley covered mostly by thermokarst lakes, permafrost tundra, and muskeg swamps (Miller et al., 2013b). The most striking local surface feature is a thaw in the permafrost, covering an area of about one-half square mile (~0.58 mi2 or 1.5 km2) that allows anomalous vegetation such as cottonwood trees, alders, grass, and various wildflowers to thrive. The most extensive published surficial geology description of the PGS suggests that the hot springs might be located near the western edge of an actively subsiding north-south striking graben, apparently resulting from north–south-trending faults (Kline et al., 1980). The publication offers eight brief lines of evidence as support, but unfortunately, contains no maps, photos, and/or diagrams to back the evidence, nor has any been reported in more recent publications. Swanson et al. (1980, p.11) suggest that “many of the canyons found on the north flank of the Kigluaik Mountains are apparently controlled by north–south-trending faults.” However, the 2011 geologic map of the Seward Peninsula (Till et al., 2011) shows no north– south-trending faults in the Kigluaik Mountains, casting serious doubt on the earlier suggestion. In spite of the 2011 map, inferred or buried north–south-trending faults are shown by Miller et al. (2013a) and are included in discussion by Glen et al. (2014). Thus, at this time, north–south- trending structures have been proposed by several researchers, but no recent geological work has focused on the Pilgrim Valley to confirm the existence of these structures, and a more recent geologic map did not give them any credence. On a smaller scale, the local geology has been evaluated with several recent drill holes to a maximum depth of 350 m (Miller et al., 2013a, 2013b). This evaluation primarily focused on the stratigraphy of the Quaternary alluvium and showed that metamorphic bedrock is present at a depth of about 320 m. Particle sizes in the alluvium range from clay to gravel, with sand, silt, and clay predominating. The sand is locally indurated with silica cement near most of the deeper wells that have been drilled. The most laterally extensive silt and clay unit is located about 164 feet (50 m) above the top of the metamorphic basement. 4. SUBSURFACE TEMPERATURES Above the top of the metamorphic bedrock at depths of about 1050 feet (320 m) the thermal fluid flow pattern has become much better defined by the activities described in this report. Some type of vertical or near-vertical permeable channel allows the thermal fluid to rise to the surface through a sequence of unconsolidated Quaternary fluvial material. If any elongation or dip accompanies this channel, it has not yet been recognized. It is possible that the access limitations for drill-hole locations allow some northwest–southeast elongation, which could be hypothesized as evidence for a fault. Drilling and temperature logging completed between 1979 and 2014 have delineated a 2 square mile permafrost-free area and a series of thermal aquifers overlying each other within this location. All holes and wells that were drilled between 1979 and 2013 are shown in Figure 4. The oldest well logs are from September 1982, when flowing and static temperature logs were obtained from the first six wells using a FENWAL model UUT-51J1 thermistor instrument, with 42 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 9 an estimated absolute accuracy of about 1°C (Lofgren, 1983) (Figure 5).A few logs from this era are questionable, especially below a depth of 200 feet in the PS-5 well log, but overall these well logs give a valuable baseline dataset with which to measure long-term aquifer temperatures. All existing and new holes and wells, except for PS-2, were repeatedly logged between 2011 and 2014. In general, temperature profiles matched the profiles reported in Woodward-Clyde (1983). Recent well logs were obtained using two different instruments. Many logs were obtained using one of three Kuster K-10 memory tools owned by the Alaska Center for Energy and Power. The Kuster tools are extremely robust, can be used up to 150°C (302°F) and 5000 psi, and can remain downhole for long periods. This tool measures temperature and pressure with an accuracy of 0.2°C. The Kuster tools were used with a strong reel of aircraft cable that could be operated by hand by one person. Once retrieved from the hole, the Kuster tool is disassembled and the data are downloaded onto a computer. 43 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 10 Figure 4. Map of all drill holes and well locations at Pilgrim Hot Springs. 44 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal _. Deep holes and wells • Geoprobe holes Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 11 The second tool was a light and simple portable wireline temperature measurement tool with surface readout, custom built for Southern Methodist University (SMU). The tool employs a platinum thermistor with a reported accuracy of ±.01°C depending on the depth. It is simply referred to here as the SMU tool. Both types of equipment were compared with one another, and the readings were virtually identical. 4.1 Updated Temperature Logging A presentation of all available PHS temperature profiles to a depth of 160 feet (Figure 6) reveals a confusing picture, but highlights a hot shallow aquifer of varying depths. The thermal anomaly consists of a shallow aquifer 10 to 20 feet deep (Figure 7) above an aquifer 55 to 90 feet deep, which is referred to here as the shallow thermal aquifer (Benoit et al., 2014a). The shallow thermal aquifer is the primary geothermal discharge zone of the geothermal fluid within the PGS. The shallow thermal aquifer can be subdivided into northern and southern portions based on the shape of the static temperature profiles measured in the associated holes and wells. While these northern and southern shallow thermal aquifers have different characteristics, they are likely not independent aquifers and are certainly hydraulically connected. Where the holes and wells penetrate the shallow thermal anomaly and show a temperature reversal, the temperature profiles define the aquifer temperature, depth, and thickness. These data were used to create an aquifer temperature map showing the flow direction and the division of the northern and southern shallow aquifers (Figure 8). Figure 5. The1982 temperature logs from the original wells drilled at Pilgrim Hot Springs from 1979–81. 0 100 200 300 400 500 600 700 800 900 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 Depth (feet) Temperature (F) Pilgrim Hot Springs Static Temperature Logs PS-1 PS-2 PS-3 PS-4 PS-5 MI-1 45 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 12 Figure 6. Temperature profiles of all holes and wells drilled to date at Pilgrim Hot Springs are shown. The temperature profiles in the top graph define the shallow and very shallow thermal aquifers shown in Figure 8 and Figure 7. The bottom graph shows all the deep holes and wells drilled to date. These profiles show the temperature minimum data that were used to create Figure 8. 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 20 40 60 80 100 120 140 160 180 200 Depth (feet) Temperature (F) All Pilgrim Hot Springs Static Temperature Logs 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 40 60 80 100 120 140 160 180 200 Depth (feet) Temperature (F) Pilgrim Hot Springs Deeper Static Temperature Logs S1 S9 PS-3 1982 PS-4 1982 PS-5 1982 MINC-1 1982 PS 12-1 2013 PS 12-2 2013 PS 12-3 2013 PS 13-1 Combined PS 13-2 Combined PS 13-3 10-29-13 46 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 13 The hottest measured temperatures in the shallow aquifer occur near the boundary of the northern and southern thermal aquifers, indicating that both are supplied from the same upwelling source and represent thermal fluid moving through permeable intervals of varying thicknesses and depths. Overall, temperature distribution of the shallow thermal aquifer appears to show primitive waters rising in its center and flowing out laterally (Figure 8). The weaker thermal aquifers penetrated by the remote northeasterly S1 and S9 holes are most likely a continuation of the northern aquifer The deep holes that have been drilled at PHS show temperature minimums in between depths of 220 and 400 feet (Figure 6). While only the 12 deepest holes penetrate the temperature minimum to a depth where positive gradients occur, they allow the creation of plan view map showing temperature minimum contours (Figure 8). The temperature minimums measured between the shallow and deep thermal aquifers, and shown in Figure 6, provide the best dataset to define the location of the upwelling zone in Figure 8. Since 91°C (196°F) fluid has been measured in the deep thermal aquifer at the top of bedrock, and 91°C fluid has been measured in the shallow thermal aquifer, there must be a zone where the 91°C fluid emerges from a fracture of some type in the metamorphic bedrock and travels between those two aquifers. The two maps in Figure 8 suggest that the thermal fluid is rising through bedrock in the northwest swampy area and flowing northeast and south through the shallow thermal aquifer. The temperature profile from well PS-12-2 shows identical temperatures of 90°C (194°F) at depths of 126 feet and 1148 feet, indicating that the geothermal fluid loses no heat as it rises from the top of bedrock to the shallow thermal aquifer. Therefore, we speculate that the hottest and most saline fluid samples collected from the thermal springs and the shallow thermal aquifer have probably not been diluted by any shallow groundwater within the unconsolidated Figure 7. Map showing the approximate margin of the very shallow thermal aquifer, the temperatures within this aquifer, and the temperatures of thermal water measured at the surface. The red boundary closely approximates a temperature of 80°F (27°C). 47 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 14 Quaternary fluvial material. This indicates that pressures are higher within the plumbing hosting the thermal flow than in the surrounding Quaternary material. 5. REMOTE SENSING The first calculations of heat loss and potential power output of the Pilgrim geothermal system (PGS) were developed from 1979 data (Harrison and Hawkins, 1980; Osterkamp et al., 1980). Harrison and Hawkins (1980) indirectly measured the surface discharge downstream from the main area of PHS at 67 gpm and used a hot water temperature of 81°C to calculate admittedly crude numbers of 1.5 and 2.2 MW due to thermal water surface discharge. A 10 MW total vertical heat flow from the thawed area around the springs was also determined. Harrison and Hawkins (1980) indicate that this total vertical heat flow is probably a serious underestimate, as it did not include the power removed by groundwater movement. It is now known that 91°C would be a more accurate original thermal water temperature. Osterkamp et al. (1980), using a Figure 8. Plan view temperature maps of Pilgrim Hot Springs. The temperature contour map on the left shows the shallow thermal aquifer at the hot springs, and is based on the shallow temperature maximum. On the right, temperature minimum contours are shown at the hot springs. Known temperature contours are shown as solid lines. Hypothetical higher temperature contours are shown as the closely spaced dashed lines These minimum temperature contours, based on deep holes and wells, in conjunction with the shallow aquifer temperature profiles, indicate the direction of thermal water flow and help pinpoint the likely upwelling zone northwest of the area where past drilling occurred. 48 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 15 more systemwide approach to estimate the heat loss, analyzed the temperature and salinity increases in the Pilgrim River after it had passed through the geothermal area. This approach resulted in minimum total accessible power values of 350 to perhaps 500 MW. However, Osterkamp et al. admit that these numbers are highly uncertain, and caution that the values “should not result in unbridled optimism.” The first remote sensing efforts at PHS occurred in 1980 with radar and infrared surveys (Dean et al., 1982). The radar study identified numerous lineaments near the PGS that have received little or no recent attention. The high altitude (60,000 ft) infrared work indicated the presence of two large and unusually warm areas along the Pilgrim River north of the hot springs, but provided no quantitative thermal data. Remote sensing work since 2010 has extended the traditional use of remote sensing for geothermal exploration by developing methods for acquiring and processing remote sensing images (Haselwimmer et al., 2011). These methods identified various surface signatures associated with the geothermal systems and derived first-order quantitative estimates of thermal fluxes. Permafrost-free areas, snowmelt areas in early spring, anomalous vegetation patterns, and heated ground and water bodies were identified as areas that warrant further study. The temperature images derived from remote sensing provided the basis for heat budget modeling. This helped to focus the field efforts for further investigation and helped to target drilling activities and develop a conceptual heat flow model. 5.1 Satellite-based Geothermal Anomaly Mapping Satellite images from Landsat, Advanced Spaceborne Thermal Emission and Reflection Radiometer (ASTER), and WorldView-2 (WV-2) were processed and used to identify areas of persistent high temperature, areas of snowmelt in winter images, and areas of greener vegetation in springtime images. An iterative approach to the use of satellite data followed by airborne surveys and traditional ground-based exploration was recommended as a routine part of a systematic geothermal exploration program. 5.1.1 Analysis of Landsat 7 Data A search of the Landsat 7 archive for ETM+ images from the PGS region yielded 18 scenes, which had been acquired between August 1999 and July 2010. Eleven datasets were selected for further analysis of cloud and snow-free images. The discrimination of thermal anomalies was undertaken using the image “stacking” approach (Prakash et al., 2011). This included pre-processing the band 6L thermal data for each dataset using the three-step procedure described by Chander et al. (2009). Thermal hot spot images for each year were integrated to identify temporally persistent thermal anomalies most likely to represent geothermal sources. A thermally anomalous pixel identified in data from three different years was labeled persistent. The ETM+ data highlight five persistent thermal anomalies located within the broad region of the PGS. These anomalies were later investigated in detail during the aerial FLIR survey. 49 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 16 5.1.2 Analysis of ASTER Data The ASTER multispectral thermal infrared data were acquired over the PHS site to identify geothermal anomalies (Figure 9). The 90 m spatial resolution of the ASTER thermal bands is lower than that of Landsat 7; however, as a multispectral instrument, ASTER is routinely used to acquire data during its nighttime ascending orbit, minimizing the effects of solar heating. The five ASTER thermal bands also enable the effects of emissivity to be accounted for within geothermal anomaly detection. The ASTER data delineated potential surface indicators of geothermal activity such as snowmelt anomalies, anomalous river ice melt, and areas of vegetation growth in the PGS region. Figure 9. A time series of ASTER visible to near-infrared imagery (top) and thermal (bottom) data from Pilgrim Hot Springs, showing snow-free areas and vegetation growth anomalies associated with geothermally heated ground. Figure 10. A subset of an ASTER wintertime false color composite image with 15 m spatial resolution is shown on the left. Prominent snow-free areas are indicated with red arrows. The left arrow points to the area near the hot springs. The right arrow points to a persistent snow- free region. A WV-2 color infrared image acquired in May 2010 is shown on the right. Healthy green vegetation (bright pink/reddish tones) and senescent vegetation (dark brownish red tones) are clearly visible (left). The processed WV-2 image (right) shows vegetation vigor, the dashed white line marking the approximate limit of vigorous nontundra vegetation. This map (right) is a color-coded Normalized Difference Vegetation Index (NDVI) image, where NDVI = (Near- infrared – Red) / (Near-infrared + Red). 50 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 17 5.1.3 Analysis of WorldView-2 Data Analysis of high-resolution VNIR (visible and near-infrared) data was completed using the commercial WV-2 satellite data. Images from WV-2 are acquired in the visible and near-infrared region of the electromagnetic spectrum at a spatial resolution of 1.2 m. The presence of the near- infrared band and high spatial resolution makes the dataset suitable for detailed vegetation mapping. Data were acquired during May 2010 and defined vegetation growth anomalies associated with geothermally heated ground (Figure 10). This work was validated with shallow- temperature survey measurements during the 2011 and 2012 field seasons that outlined the extent of the shallow and very shallow thermal aquifers (Benoit et al., 2014a). 5.2 Airborne Forward Looking Infrared Surveys Forward Looking Infrared Radiometer (FLIR) data collected from airborne surveys were used to calculate the geothermal potential of the PGS using a thermal budget model. Airborne surveys were conducted in fall 2010 and spring 2011, and data were mosaicked and processed to create high-resolution optical and thermal images. Thermal data-processing algorithms used by the volcanology community were adapted to compute heat flux. Airborne surveys were planned around high- and low-priority survey areas (Figure 11) to provide flexibility in case of poor weather conditions. The primary survey area covered a region approximately 27 km2, centered on the main PGS site encompassing the most likely geothermal anomalies detected from the Landsat 7 ETM+ data (red polygons in Figure 11). The secondary survey area covered a region approximately 175 km2, including the sites of the other thermal anomalies detected from Landsat. Figure 11. Landsat 7 satellite images of the Pilgrim Hot Springs region. The left image shows the extent of the primary and secondary survey areas; thermal anomalies detected from Landsat 7 satellite data are indicated by red filled polygons. On the right are the flight line locations for the aerial survey over the hot springs; cloud and turbulence restricted data acquisition over the southern half of the secondary survey area. 51 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 18 The first airborne survey was undertaken from September 9–15, 2010, using the Nome Airport as the base for flight operations. Favorable weather conditions enabled acquisition of data over the entire primary survey area and the northern portion of the secondary survey area. Flights over the southern portion of the secondary area were not possible due to persistent cloud cover and turbulence around the northern flanks of the Kigluaik Mountains. The FLIR images were successfully acquired along all the flight lines shown in Figure 11. Optical imagery was acquired for most of the flight lines; however, technical issues led to some gaps in the imagery in the northern part of the secondary survey area. Thermal images were acquired using a FLIR Systems A320 camera that records emitted thermal infrared radiation in the 7.5 to 13 µm wavelength region. The FLIR has a 320  240 pixel sensor with a 25 µm sensor pitch and 18 mm lens. Visible images were acquired using a Nikon D700 digital camera with an 85 mm f/1.8 lens fixed at infinity. The FLIR and D700 cameras were positioned side-by-side in a fixed nadir-looking mount within the aircraft. The FLIR camera was set to continuously record thermal images at a frame rate of 5 Hz, and Topoflight Navigator software triggered the shutter of the D700 camera at pre-programmed intervals along the flight lines. A Crossbow NAV440 GPS/IMU unit recorded the position, roll, pitch, and yaw of the plane during the survey. A flying height of about 1000 m yielded an approximate spatial resolution of 1.4 m for the thermal imagery and 20 cm for the optical imagery. The second airborne survey was flown in April 2011 and was restricted to a small area centered on the PGS property. During this survey, optical images were acquired at 20 cm resolution and FLIR data were acquired at 1.2 m spatial resolution. In- flight GPS data were recorded and time synced with the optical and FLIR image frames. 5.2.1 Field Calibration and Validation Concurrent with the fall 2010 airborne survey, a field party of three undertook ground calibration and validation work in support of the airborne FLIR and optical data collection. Accurate geographic positions of well-spaced and notable ground features and thermal blankets (Figure 13) were recorded using portable Garmin and Trimble GPS receivers. These ground control points enabled georegistration of the FLIR and optical data. Thermal blankets provided geo-located “cool” targets readily delineated from the FLIR data (Figure 12). Figure 12. Low-emissivity thermal blankets (cold targets) were used as ground control points for registration of airborne FLIR and optical image data. 52 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 19 Figure 13. Field calibration and validation data sites for the primary target area of the Pilgrim Hot Springs survey; the data are overlain on a high resolution color near-infrared aerial photograph (AHAP) of the study area. Wind speed, temperature, and humidity measurements were recorded throughout the collection period to calibrate the thermal data. Ground and water temperatures were recorded using TEGAM thermocouple sensors. Several ground temperature profiles were also recorded near the main hot spring site to compare against the retrieved FLIR surface temperature data, enabling further calibration as needed (Figure 13). Two HOBO temperature-logging systems provided continuous measurements of ground temperatures after the survey had been completed. The region around the main hot springs site and an area about 3.5 km northeast along the Pilgrim River, where field observations provided some evidence for a geothermal anomaly, were the priority regions (Figure 15). Initial processing of the FLIR data required knowledge of the surface temperatures and humidity values as inputs to the ThermaCam research software. The average flying height was also integrated to correct for atmospheric absorption and emission. A comparison of collected FLIR surface temperature values with ground-based temperature profiles shows agreement to within about 5°C (Figure 14). For the first airborne survey, the surface temperature images were manually georegistered to a high-resolution aerial photograph of the region from the Alaska High-Altitude Aerial Photography (AHAP) program and then mosaicked using ArcGIS software. There was significant overlap of the individual FLIR frames, associated with the 5 Hz acquisition rate. A high-quality mosaic Figure 14. Comparison of a FLIR-derived temperatures profile (black line) with a field temperature profile (red line) for a selected profile line. 53 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 20 image was obtained using every fifth image. Color in the visible images was adjusted to improve the contrast, then georeferenced against the AHAP aerial photograph and mosaicked together with a minimum of overlap. A semi-automated methodology was used to mosaic the spring 2011 images. The in-flight time synced GPS information was synchronized with the optical and FLIR sensor systems to georeference each image. To mosaic the images together, 2d3 software was used. Due to logistical challenges, the second round of field validation work was delayed until August 2011. This fieldwork included:  Gathering in situ measurements of hot spring temperatures.  Validating the locations of springs mapped from FLIR data, and acquiring in situ thermal images of hot springs and pools.  Measuring the outflow rate of hot springs.  Validating the extent of snowmelt anomalies and inferred geothermally heated ground using 1.20 cm shallow temperature probes.  Recording the temperature and conductivity of the Pilgrim River as well as local streams and locating outflow of saline geothermal waters. 5.2.2 Mapping Using Airborne Images The main surface geothermal features such as hot springs, wells, pools, and areas of hot ground can be clearly delineated using the fall 2010 FLIR imagery with its 1.3 m resolution. The surface water temperatures in the images are as high as 40.5°C (105°F). The FLIR imagery helped Figure 15. Mosaicked FLIR surface temperature data for the main Pilgrim Hot Springs site (bottom left) and possible geothermal area to the northeast (top right). 54 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 21 researchers to delineate geothermal features that would be difficult to map using visual imagery alone. Examples of such features include:  Upwelling thermal plumes within pools of water  Temperature gradients within pools and streams indicating the flow paths and mixing of hot and cool waters  Subtle thermal features that may represent previously unmapped small springs  Areas of hot ground away from the main spring complex. The optical images acquired during the same period provide useful complementary information, especially about land cover in the area (Figure 16). The analysis of the FLIR data from the area northeast of the main PHS site (Figure 15) provided little evidence for current geothermal activity. The range of surface temperatures is consistent with the different surface types (vegetation, soil, water ponds), and there are no obvious thermal anomalies. Nevertheless, the ground cover present in this region is similar to the ground cover near the hot springs, and it is not found elsewhere in the region. The April 2011 survey was completed in early spring when the region usually is still covered by a thick blanket of snow. The survey timing proved useful for mapping areas of snowmelt (Figure 17), a direct indicator of surface heating from the very shallow geothermal aquifer. Snowmelt areas also correspond to permafrost-free areas and anomalous vegetation growth not regularly found on the Seward Peninsula. The spring FLIR data were more useful than the fall FLIR data in identifying the limits of the very shallow thermal aquifer (Figure 17). Figure 16. FLIR (left) and optical data (right) from the fall 2010 survey over the main Pilgrim Hot Springs site. The FLIR data effectively delineate surface features associated with the geothermal system, such as hot springs, pools, and warm ground. 55 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 22 Figure 17. Processed airborne images for parts of the study area. Top left: Temperature map from September 2010 FLIR survey. Top right: Temperature map from April 2011 FLIR survey. The April 2011 image more clearly reveals the limits of the shallow hot aquifer. Bottom left: Subset of the April 2011 image, indicated with a white box in top right panel. Bottom right: Optical image of the area corresponding to the image in the bottom left panel. The optical image reveals underlying soils (brown), as the snow has melted over these areas due to geothermal heating. 56 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 23 5.2.3 Heat Budget Modeling A heat budget model was developed to quantify the radiant and convective heat flux and the flow rate of surface geothermal waters (Figure 18). An initial model treated all hot pixels in the same way, regardless of whether they were associated with heated ground or hot water. Upon further examination, it became clear that hot ground and hot water gain and lose heat differently, and the thermal flux estimations for these features need different approaches. An improved heat flux modeling process was developed (Haselwimmer et al., 2011; Haselwimmer and Prakash, 2011). Both approaches are discussed in this section. Initially, heat loss was estimated from the geothermal system by correcting for background temperature and the natural radiative heat loss of the earth and sun. Using a modified Stefan- Boltzmann equation (see below) with fixed values for surface emissivity and background temperature, the radiant flux was calculated for each pixel representing a geothermal feature: Figure 18. A simplified conceptual model of the Pilgrim geothermal system used for numerical calculations of thermal flux from the processed FLIR data. 57 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 24 Μ (Τh4 - Τb4) where To delineate the pixels associated with geothermal areas, a mask was created using a temperature threshold applied to the FLIR image. The background temperature value used in the thermal flux calculation was the average temperature value from the non-geothermal areas (not including anthropogenic and other non-geothermal temperature anomalies). The radiant flux value for each geothermal pixel was summed to calculate the total radiant flux, which amounted to 6.2  105 Watts. This method underestimated the thermal flux associated with the hot waters, so a sensitivity analysis was not performed (Haselwimmer et al., 2011). Upon further consideration, we concluded that the convective component was likely the dominant heat transfer component. Later model development attempted to establish methods for estimating the convective heat flux from geothermal hot springs and pools. Pixels associated with hot waters and hot ground are easily separated on the FLIR image mosaics. These water pixels were isolated for further analysis. Adapting an approach applied to volcanic crater lakes (e.g., Patrick et al., 2004), an energy budget model was developed to quantify the convective heat flux along with the flow rate of the surface geothermal waters at PHS (Figure 19). Complete details about the thermal model used for the quantitative analysis are presented in Haselwimmer and Prakash (2011) and are briefly Μ = radiant flux density (W/m2) ε = emissivity σ = Stefan-Boltzmann constant Τh4 = temperature of pixel in Kelvin Τb4 =temperature of background in Kelvin Figure 19. A total surface energy budget model for the Pilgrim geothermal system. Refer to the main text for an explanation of each term. 58 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 25 described below. The total heat budget for a water body (in Watts) expressed as Фtotal = Фgeo + Фppt + Фseep + Фevap + Фsens + Фrad + Фsun + Фsky where Simplifying this model further, Фppt and Фseep were removed, as these heat fluxes are small. The temperature of surface non-geothermal waters was used to account for Фsun and Фsky terms. Pixels associated with geothermal surface waters were isolated, and the geothermal heat flux density was calculated in W/m2on a pixel-by-pixel basis using the following equation: qgeo = (qrad + qevap + qsens) - (qradAmb + qevapAmb + qsensAmb) where qrad, qevap, qsens and qradAmb, qevapAmb, qsensAmb are radiative, evaporative, and sensible heat fluxes for each pixel at the ambient temperature of non-geothermal waters. Further, qrad, the radiative heat flux, was calculated using the Stefan-Boltzmann equation: qrad = εσT4 where Also, qevap+sens, the evaporative and sensible heat fluxes, were calculated using the formula presented by Ryan et al. (1974): qevap+sens = [λ(Tsv-Tav)1/3+ boW2][es-e2+C(Ts-Ta)] Фgeo = heat input from geothermal fluids Фppt = heat input from precipitation Фseep= heat flux from seepage Фevap= heat loss from evaporation Фsens= heat loss via sensible heat transfer Фrad = heat loss by radiation Фsun = heat input from solar radiation Фsky = heat input from atmospheric radiation σ = 5.67 x 10-8 (Stefan-Boltzmann constant in W/m2 K-4) ε = water emissivity(0.98) T = water temperature (°C). 59 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 26 where This model was applied to both FLIR datasets. The total heat flux is the sum of heat fluxes for each pixel, representing the hot water at the surface. Flow Rates Assuming a fixed hot springs temperature of 81°C and water at the ambient air temperature, the flow rate (V) in m3/s was calculated from the total geothermal heat flux (Фgeo) using the following equation: V = [Фgeo / (hs-hamb)] / ρw where Heat Budget Modeling Results The computed heat flux/flow rate estimates are generally higher than the in situ observations. This difference is likely caused by underestimating in situ measurements of the total outflow rate of the hot springs. These calculated results are quite conservative as they assume a wind speed of 0 m/s, which is unrealistic for the PHS area. The nearest meteorological station about 50 km northeast of PHS reports an average annual wind speed of 3.18 m/s. Therefore, the true heat flux is likely to be higher than estimated in the following table: Table 1. FLIR heat flux estimates. λ = 2.7 (constant) bo = 3.2 (constant) W2 = wind speed at 2 m height (m/s) es = vapor pressure of water at Ts (mbar) e2 = vapor pressure of water at 2 m height (mbar) C = 0.61 (constant) Ts = water surface temperature (°C) Ta = air temperature (°C) Tsv = virtual water surface temperature (°C) Tav = virtual air temperature (°C) hs = enthalpy of hot spring water hamb = enthalpy of water at ambient temperature ρw = density of water (kg/m3) 60 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 27 Heat flux estimates are sensitive to wind speeds, as shown in Figure 20. Using a wind speed of 1.5 m/s, the heat flux estimated using FLIR data is 6.96 MW, which corresponds to a flow rate of 0.90 ft3/s, equivalent to 404 gpm. 5.2.4 Discussion Aerial FLIR surveys have been a useful tool in the initial stages of geothermal exploration at PHS. For geothermal exploration using aerial FLIR surveys at systems similar to PHS, 1 to 2 m spatial resolution appears to be sufficient to estimate heat flux using the steps outlined above. A springtime FLIR survey is likely more useful than a fall FLIR survey for identifying blind geothermal resources in high-latitude snow-covered regions where the hot ground contrasts well with cooler snow-covered areas. Combined optical and FLIR airborne surveys offer a relatively inexpensive addition to geothermal resource exploration for targeting further field-based data collection strategies. In logistically challenging areas, such as many areas of Alaska, these surveys may be the most cost-effective method for the first phase of geothermal exploration. While airborne surveys were limited to the use of optical and FLIR cameras, the future use of multispectral or hyperspectral imaging sensors, consisting of several spectral bands in the near- and shortwave-infrared regions, may better characterize the vegetation signatures and alteration minerals associated with the geothermal activity. Heat budget modeling performed in this study estimated that heat flux and flow rates of geothermal waters can be transferred to the characterization of both low-temperature and high- temperature geothermal resources. 6. GEOPHYSICAL SURVEYS In collaboration with the USGS, ACEP conducted geophysical surveys between 2010 and 2013, including a gravity survey in 2010, a high-resolution airborne magnetic and electromagnetic (EM) survey in 2011, and a magnetotellurics (MT) survey in 2012. The goal of these surveys was to provide the regional geophysical framework of the area and help delineate key local and regional structures controlling hydrothermal fluid flow, and characterize the basin geometry and depth to bedrock. Figure 20. The effect of wind speed on heat flux is estimated from fall 2010 and spring 2011 FLIR data for the Pilgrim geothermal system area. 61 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 28 6.1 Gravity Surveys The PGS gravity data were obtained in 1979 and 1980 (Kienle and Lockhart, 1980; Lockhart, 1981) and in 2010 by the USGS. In 1979, 122 stations were occupied along several traverses made on foot and by helicopter, boat, and car. In 1980, one 43 km long north–south regional line was run through PHS (Figure 21). Stations in 1979 were generally along lines, and most stations were 1 to 3 km apart. In the immediate vicinity of the thermal springs, stations were more closely spaced. Station spacing along the 1980 line was anywhere from 1 to 5 km apart. These surveys lacked precise elevation control. Two sets of closely spaced gravity contours trending east–northeast and north–northeast and intersecting a short distance southwest of the thermal area were hypothesized to result from a down dropped basement fault block (Kienle and Lockhart, 1980). The 295 USGS gravity stations in 2010 were located along five north–south lines and one northeast–southeast line, with an additional scattering of more regional points. These data have been merged with the 1979 and 1980 data (Glen et al., 2014). The additional data generally confirmed the earlier contour pattern, with a pronounced gravity low centered about 4 km southwest of the thermal springs being the dominant feature in the valley (Figure 22).The second and more dominant regional gravity feature is along the Kigluaik Mountains range front 2½ miles south of the thermal springs. Figure 21. Gravity stations are labeled on a topographic map of the Pilgrim Hot Springs region. Stations shown by red dots are from the 2010 survey. The earlier stations are shown by gray dots. 62 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 29 6.2 Airborne Magnetic and Electromagnetic Surveys In October 2011, airborne and electromagnetic surveys were flown over the hot springs area. The USGS was primarily responsible for managing this program and interpreting the data. Survey details can be found in Appendix E. About 556 km were flown along north–south lines with east–west tie lines. The mean survey drape of the instrument was 38.2 m. The contractor, Fugro, performed the basic data processing, and the USGS applied additional processing with derivative and filtering methods (Glen et al., 2014). Aeromagnetic data usually provide the most complex and ambiguous geophysical data normally used in geothermal exploration, and the PHS aeromagnetic results live up to this reputation. Glen et al. (2014) note magnetic highs in the vicinity of the PGS and further northwest, and a pronounced magnetic low along the Kigluaik Mountains range front on a reduced-to-pole Figure 22. Isostatic residual gravity map from Glen et al. (2014) used to map the structural basin. Light blue (immediately below Pilgrim Hot Springs) correlates to a basin depth to basement at 320 m (corroborated with drilling contact). Southwest of the hot springs, the deeper basin, indicated by dark blue, is estimated at about 800 m depth. Shallow areas are represented by red. 63 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 30 magnetic field map (Figure 23). A residual reduced-to-pole magnetic map shows a more complicated pattern of shallow-sourced anomalies, with a small magnetic low in the immediate vicinity of the thermal springs (Figure 23). Two narrow northeast–southwest-trending anomalies northwest and north–northeast of the hot springs have magnetic signatures in good alignment with mapped mafic dikes in the Kigluaik Mountains (Glen et al., 2014) and may represent possible dikes that either have not yet been found on the surface or do not quite reach the surface. A magnetic lineation map based on maximum horizontal gradients shows that the PGS is in a somewhat unique position, where two trends terminate as they intersect a third trend. A broad east–west trend is largely terminated by a northeast–southwest trend, and a northwest– southeast trend is terminated by a northeasterly trend (Figure 24). The same generalized trends are present on the isostatic gravity map (Figure 22), giving additional credence to these regional magnetic trends. The depth extent of the electromagnetic survey is in the range of 20 to 125 m (Figure 3 in Glen et al., 2014). The most striking low resistivity in the survey area is centered on the PGS and is approximately co-located with the thawed area at shallow depths near 15 m (Figure 25). A much larger but less intense shallow resistivity anomaly is located north and northeast of the center of the PGS, and overlies the known, but Figure 23. Magnetic field maps from Glen et al. (2014). Magnetic highs appear as reds and pinks, gravity lows as blues and purples, in the reduced-to-pole magnetic anomaly map (left). Magnetic highs appear as reds and pinks, gravity lows as blues and purples, in the differential reduced-to-pole map (right). Figure 24. Magnetic lineations interpreted from maximum horizontal gradients of pseudogravity. Colored by trend (EW, red; NW, blue; NE, green). From Glen et al. (2014). 64 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 31 largely unexplored, northeastern thermal anomaly. At a slightly greater depth of 35 m, the northeastern thermal anomaly area is the dominant low-resistivity area, and the core of the known PGS is no longer particularly low in resistivity (Figure 25). The presumed upflow area is in this region and will be discussed later in this report. Two areas west–southwest and southwest of the PGS have interesting low-resistivity values at a depth of 15 m, and it is speculated that they result from graphitic metamorphic rocks (Glen et al., 2014). The higher-resistivity rocks reflect metamorphic bedrock and coarser-grained glacial outwash sediments. Unfortunately, the electromagnetic survey was not capable of penetrating to depths near the PGS, which would have helped locate the upwelling zone, but the survey does offer the possibility that other and possibly even larger thermal areas are in the Pilgrim Valley. 6.3 Magnetotellurics Survey In August 2012, Fugro obtained 59 magnetotellurics (MT) soundings at the PGS. Spacing between sites varied from about 300 feet to about 1800 feet, with less-dense coverage away from the center of the known thermal anomaly (Figure 26). The outer ring of MT sites was specifically chosen to extend beyond the known limits of the shallow thermal anomaly in all directions except toward the northeast. No sites were occupied north of the Pilgrim River, as the intent was to locate the upwelling of the PGS, not to study the more inaccessible northeastern thermal anomaly. At a depth of 25 m, approximately the known depth of the shallow thermal aquifer, the MT data show a nearly circular low-resistivity area about 900 m in diameter, with resistivities as low as 2 Ohm-m. The MT is probably responding to the high salinity of the PHS thermal fluid. The area with resistivity less than about 5 Ohm-m is a good approximation of the 49°C (120°F) temperature contour defining the shallow thermal aquifer. Above about 5 Ohm-m, the resistivity contours are tight, rapidly climbing to values above 100 Ohm-m. The high resistivity values probably reflect the low-salinity permafrost surrounding the thermal anomaly. Figure 25. Airborne EM resistivity slices shown at 15 m (left) and at 35 m (right). From Glen et al. (2014). 65 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 32 The sharp margins of the MT anomaly are also clearly defined in cross-sectional view (Figure 27). The temperature contours at shallow depths generally behave in a sharply bounded fashion, near the edge of the shallow thermal aquifer (Figure 28). The obvious exception to the sharp boundaries for both datasets is toward the northeast, where the shallow thermal aquifer has its greatest known length. The MT anomaly also extends that direction. The MT data show a short “nose” extending southwest of the PS-5 hole that was not picked up by the temperature data. At a depth of 50 m, a short distance below the shallow thermal aquifer the resistivity increased slightly, but the circular anomaly core is still present (Figure 28). Figure 26. Magnetotellurics site locations. Figure 27. Resistivity at Profile D from a 1D MT inversion. 66 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 33 The thermal minimum in the deeper PGS wells occurs near a depth of 100 m. At this depth, the MT shows the smallest areal extent of less than 3 Ohm-m resistivity of any of the depths (Figure 29). The lowest resistivity values are now centered about 85 m southeast of well PS-12-2. At depths between 100 and 300 m, which are within the Quaternary alluvium, the area of less than 5 Ohm-m gradually expands and moves toward the northwest (Figure 29). Between depths of 300 and 500 m, in the metamorphic bedrock, the lowest resistivity values shift noticeably about 0.5 km to the southwest; by 500 m, they are centered beneath well PS-5 (Figure 29 and Figure 30). By a depth of 1000 m, the lowest resistivity values have radically shifted east and northwest of the shallow thermal anomaly (Figure 30). Since the MT survey was run to help locate the upwelling zone, the question of whether this survey was successful must be addressed. While MT clearly succeeded in locating and outlining the shallow thermal anomaly, there is no clear evidence that MT located the thermal upwelling. The small volume of low-resistivity values near PS-12-2 at depths of 100 to 200 m within the alluvium cannot directly represent thermal upwelling, given the temperature profile of PS-12-2. The large horizontal shifts of low-resistivity areas below 300 m in metamorphic basement rocks may represent some larger-volume conductor(s) other than hot water. The full Fugro (2012) report, which discusses this topic in detail, is included as Appendix L. Figure 28. Resistivity maps at 25 m and 50 m from the blind 3D MT inversion. The red line represents the 49°C (120°F) temperature contour in the shallow thermal aquifer. The straight black lines are the MT transects. 67 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 34 Figure 29. Resistivity maps at 100 m, 150 m, 200 m, and 300 m depths from the blind 3D MT inversion. The red line represents the 49°C (120°F) temperature contour in the shallow thermal aquifer. 68 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 35 7. DRILLING ACTIVITIES The bulk of the money and effort invested in the geothermal exploration project at PHS was used for drilling activities, with the aim of obtaining accurate subsurface temperature data and identifying the main upwelling zone. Drilling ranged from very shallow activities carried out with a simple gasoline-powered backpack drill, to large-diameter drilling that required a large rotary drill rig and mud circulation systems capable of drilling a 14-inch-diameter well to bedrock. Additionally, the valves on the wellheads of the wells drilled in 1979 and 1982 were replaced to cease uncontrolled artesian flows and allow the wells to be logged in a static state. The deep holes and wells that have been drilled at the site since 1979 are shown on Figure 4. Figure 30. Resistivity maps at 400 m, 500 m, 750 m, and 1000 m depths from the blind 3D MT inversion. The red line represents the 49°C (120°F) temperature contour in the shallow thermal aquifer. 69 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 36 7.1 Permitting Before any of the drilling activities described in this report could occur, a variety of permits and land usage agreements had to be secured. Permits were obtained in several phases as drilling plans were refined and new data were input into geothermal models of the area. Land use permits were also obtained so that UAF and its contractors could legally perform activities associated with geothermal exploration on the landholdings of various entities. The land use agreements, permits, and waivers that were obtained for this project are summarized in Table 2. Table 2. Permits and approvals 7.2 Legacy Wellhead Repairs During 1979 and 1982, six wells penetrating the shallow thermal aquifer were drilled to depths of 1000 feet. These wells were never plugged and were abandoned. Due to a lack of maintenance, the wellheads were in extremely poor condition when examined by ACEP in 2009. The wellheads had to be repaired to control artesian flows and permit new static temperature logs and water samples. During an initial site visit in July of 2010, an assessment of each well was made and work plans were developed. Wellhead repairs occurred September 13–18, 2010. The team completing the repairs was able to replace the master gate valves on wells PS-1, PS-3, PS-4, and MI-1. Wells PS-2 and PS-5 were not found to be leaking, and the team was not able to replace the gate valves because of swampy conditions around the wells, which restricted heavy equipment access. At each of the four repaired wellheads, the team removed the existing gate valves while pumping down the water and installed new stainless steel valves. Detailed repair descriptions for each well are given in Appendix D. Images from the repair of well PS-4 are shown in Figure 31 and Figure 32. Entity Permit or Approval Alaska Oil and Gas Conservation Commission Permits to drill Alaska Department of Environmental Conservation Storage/discharge of drilling waste solids, Waste water discharge approval/ waiver National Environmental Policy Act Project review Department of Natural Resources Temporary water use permit for drilling makeup water and flow testing Alaska Department of Fish and Game Project approval, Waiver of fish habitat permit for flow test U.S. Bureau of Land Management Permit for road or trail improvements, Gravel pit use U.S .Army Corp of Engineers Verification that project is in Nationwide Permit 6 accordance Mary’s Igloo Native Corporation Land use permit Unaatuq, LLC Exploration license Bering Straits Native Corporation Exploration license State Historic Preservation Office Finding of no historic properties effected 70 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 37 Multiple static and flowing temperature and pressure logs were obtained for all wells except for PS-2, where the wellhead has sunk into the soft ground and the master valve is inoperable. Water samples were collected from these wells and from the natural hot springs for chemical analysis. 7.3 Shallow Temperature Survey At shallow depths, the PGS is dominated by a strong lateral flow of geothermal water, identified three decades ago when the first six wells were drilled into the system. The maximum temperature of this shallow aquifer is slightly below boiling, and the depth to the most hydraulically conductive part of the aquifer is less than 100 feet. This combination of factors produces very high shallow- temperature gradients above the thermal aquifer and sharp temperature declines below the aquifer. The smooth nature of the six early shallow temperature profiles strongly suggests that the aquifer began transmitting hot water in the relatively recent past and that the lower temperatures beneath the aquifer are a result of downward conduction of heat from the aquifer—not a flow of cold water beneath the thermal aquifer. If there were a counterflow of cold water, complexity such as isothermal segments in the temperature profile separated by short intervals of extremely high temperature gradients would be expected. This combination of characteristics at PHS allows the possibility of defining the shallow thermal aquifer with abnormally shallow holes compared with most other geothermal systems. Characterizing the shallow thermal aquifer allows definition of the directions of thermal fluid flow within the aquifer and recognition of the hottest part, which most likely would overlie thermal upwelling beneath the aquifer. The absence of bedrock and coarse conglomerate in the vicinity of PHS is also an important factor that allowed consideration of low-cost and unconventional drilling techniques. The flat, Figure 31. Areas of leaking, scale, and corrosion are shown on PS-4. Figure 32. The PS-4 completed replacement valve installation. 71 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 38 swampy topography at PHS is an advantage to the extent that it minimizes topographic effects at shallow depths; however, it also inhibits access to much of the area with machinery. The first shallow temperature holes at PHS were installed in 1979, when about 70 “pipes” were hand driven to a maximum depth of 5 to 9.5 m (Harrison and Hawkins, 1979; Osterkamp et al., 1980). An isothermal map at a depth of 4.5 m was prepared, outlining the central part of the shallow thermal anomaly with temperatures between 30°C and 80°C (86°F–176°F). Effort was focused on the heart of the shallow thermal anomaly, and none of the holes was deep enough to penetrate into or beneath the shallow thermal aquifer. 7.3.1 Backpack Drilling Program Two additional shallow temperature surveys were attempted in April 2011 using a small backpack-mounted drill. Thirty-one holes were drilled to depths of 3 m while the area was still snow-covered and could be accessed by snowmobile. However, a number of challenges arose including holes collapsing before tubing could be installed and snow depths of 2 m. These challenges limited the ability to install as many holes as desired to a uniform depth, which presents difficulty with interpretation. The backpack-drilling effort did not produce results much better than the effort made in the 1970s. 7.3.2 Geoprobe Drilling Program Discussion with USGS project partners revealed that they had a self-contained track-mounted direct-drive Geoprobe unit, touted as capable of driving pipes to depths of less than 30 m. The unit is highly mobile, and at a weight of 5000 pounds, was light enough to travel on trails in the PHS area with minimal impact. The Geoprobe unit drives small-diameter sealed pipes into the ground without the need for circulatory fluids (Figure 33), eliminating the mud system that traditional drill rigs require. During the summer of 2011, sixteen Geoprobe holes with an outer pipe diameter of 2.25 inches (5.7 cm) and a hole diameter of 1.5 inches (3.81 cm) were installed to a maximum depth of 109 Figure 33. Installing Geoprobe holes at Pilgrim Hot Springs. 72 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 39 feet. Locations and temperatures are shown in Figure 34. Prior to the end of the 2011 season, all holes were decommissioned by pulling the pipes and sealing the holes with grout as the pipes were removed. Figure 34. Location of Geoprobe holes and their temperatures in Fahrenheit at 60 feet. 73 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal J0$.0(0 .. "..OIO.U4~ • .. • "$=41o;3 • Prediction Map iholes_summary_2012J.(FT60J Filled contours .40 -50 ·50-60 .60. 70 .70-80 60 ·90 90-100 100 ·110 110 -120 120 -130 130 ·140 140 -150 .150 -160 .160 -170 .170 -180 .180 -190 .190 -200 0 62 .5125 I I I I I I 250 Meters I I Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 40 Nearly all of the Geoprobe holes from 2011 failed to reach beyond 80 feet deep; none penetrated into or beneath the shallow thermal aquifer. In 2012, smaller pipe (1.25 in. outer diameter; 0.5 in. inner diameter) was used in 54 holes, enabling deeper penetration (Figure 34). The deepest hole reached 154 feet. The majority of these holes still have positive temperature gradients, but some have encountered isothermal conditions indicative of having penetrated the shallow thermal aquifer, documenting its maximum temperature (Figure 35). Phase 2 drilling produced known depths of the aquifer, so it was possible to extrapolate some of the Geoprobe hole temperature profiles and better define the flow pattern within the shallow thermal aquifer. All Geoprobe locations and depths are shown in Appendix C. 7.4 Deep Drilling Deep drilling at PHS occurred over three different field seasons: 2011, 2012, and 2013. Holes and wells drilled more than 500 feet in total depth required permits from the Alaska Oil and Gas Conservation Commission, while those shallower than 500 feet did not. During 2012, a blowout preventer (BOP) was required when drilling below 1000 feet. In 2013, a waiver was obtained, and a BOP was not required. Drilling in 2011 and 2012 was accomplished with USGS Alaska Rural Energy Project equipment and personnel. This drilling was done with an Atlas Copco CS- Figure 35. The temperature logs from all Geoprobe holes show a wide variety of temperatures and profile shapes. A shallow thermal aquifer of varying depths and characteristics is clearly visible. 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 20 40 60 80 100 120 140 160 180 200 Depth (feet) Temperature (F) Pilgrim Hot Springs Geoprobe Temperature Logs 74 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 41 1000-P6L drill rig, while in 2013, drilling was done by MW Drilling using their Schramm Model T555 Rotadrill rig based out of Anchorage, Alaska. Well schematics and detailed descriptions for each well are found in Appendix A. In June 2011, prior to drilling activities, researchers from ACEP and the USGS conducted an aerial inspection of PHS via helicopter to locate suitable temperature gradient (TG) hole drilling locations. Nine possible drill sites were identified. The initial drilling targets were northeast of the historic hot springs, located on land owned by the Mary’s Igloo Native Corporation. This decision was based on data from the 1982 drilling effort, especially the cool temperatures and low bottom-hole gradient measured in well PS-5 (Figure 5). Drilled in 1982, PS-5 was the deepest well that had been drilled during that effort; it also recorded the coolest temperatures. This information clearly showed that the upwelling zone could not be located south of the existing well field. The upwelling zone appeared to be located northeast of the existing wells, with evidence for this supported by the appearance of a thawed zone in the northeast area. In 2011, drilling was sited as far north as logistically possible, where the USGS drill rig could access the area using existing primitive roads and trails. Drilling took place just southwest of the Pilgrim River and resulted in TG holes S-1 and S-9 (Figure 4). The temperatures measured in these holes were significantly cooler than the temperatures measured in the existing wells, suggesting that these two holes were too far to the northeast and that the upwelling zone must be closer to the historic hot springs. In 2012, three TG slim holes were drilled on the PHS property owned by Unaatuq, LLC. Drilling logs for these wells are shown in Appendix J. The 2012 drilling activities moved farther to the south, with the first hole (PS-12-1) located slightly north of the historic orphanage buildings and the second and third holes (PS-12-2 and PS-12-3) drilled near the existing well field. The equilibrated temperature profiles (shown in Appendix B) collected from these three wells show temperature reversals beneath the shallow thermal aquifer, indicating that they are not directly over the upwelling zone. The holes drilled in 2011 and 2012 used sealed casing cemented in place. The holes were only permitted as TG holes and were not intended to have the ability to access fluids in the geothermal aquifer. Once drilling was completed, the casing was filled with water so that a temperature probe could be lowered into the hole to record accurate static aquifer temperature profiles. Wells drilled in 2012 were at first assigned names by the Alaska Oil and Gas Conservation Commission: TG-1, PS-12-3, and PS-12-9. In order to be consistent with the existing nomenclature, the names of these wells were changed so that TG-1 became PS-12-1, PS- 12-3 became PS-12-2, and PS-12-9 became PS-12-3. In 2013, an attempt was made to drill a large-diameter well into the predicted upwelling zone and test fluid production from the aquifer above the bedrock. The drilling methods used were similar to those used in 2011 and 2012, but makeup water was pumped from the slough on the property in accordance with state and federal regulations. The first drill site was chosen based on data from the wells drilled in 2012, which suggested that those wells surrounded the upwelling. When the first well drilled in 2013—PS-13-1—encountered the usual large temperature reversal and showed lower temperatures than hoped, it was completed in the shallow aquifer. Two more 75 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 42 small-diameter wells were drilled in 2013 to 400 feet. All wells drilled in 2013 showed temperature reversals, indicating that they were not directly over the upwelling. All three holes drilled in 2013 used perforated casing or well screen and have artesian flows. Details about each deep TG hole and well are described in Appendix A. 8. WATER CHEMISTRY The geochemistry of the thermal fluid at PHS is one of the primary reasons why so much effort over so many years has been put into exploring this geothermal system. In addition to its relatively hot surface temperature, thermal fluid at PHS has the highest predicted quartz geothermometer temperature (137°C) and one of the highest Na-K-Ca geothermometer temperatures (146°C) of the thermal springs on the mainland of Alaska (Miller et al., 1975). Chemical analyses of PHS thermal waters now cover a century (Waring, 1917; Miller et al., 1975; Liss and Motyka, 1994; Benoit et al., 2014b), and an extensive water chemistry database has been assembled (Table 3). The thermal water at PHS is relatively high in sodium and chloride, but stable isotope analyses of thermal and cold waters at this location show that the thermal water is derived from local meteoric runoff and not from seawater (Miller et al., 1975; Liss and Motyka, 1994). Only three noncondensible gas samples from PHS thermal waters have been analyzed, and these contain mostly methane and nitrogen and are relatively high in hydrogen (Liss and Motyka, 1994). Gas geothermometry results indicate subsurface temperatures from 113°C to 230°C (235°F–446°F). The surface flowing temperatures and brine chemistry of some of the PHS wells have changed with time (Liss and Motyka, 1994), but these changes have since been shown to result from changes in fluid entry points in those wells (Benoit et al., 2014b). Table 3. Pilgrim Hot Springs well chemistry in PPM Sample Date T°C pH Na K Ca Mg Li B SiO2 HCO3 CO3 SO4 CL F Spring 1915 70 1590 61 545 7.4 87 21 25 3450 Spring 1972 82 6.75 1450 61 530 1.4 4.0 2.4 100 30.1 24 3346 4.7 Spring 1982 55 6.8 1660 59 542 1.0 4.5 2.2 91 36 15 3360 4.3 Spring 1993 42 6.5 1580 65 569 1.5 4.0 2.7 86 19 18 3530 4.7 Spring 1993 55 6.8 1660 59 542 1.0 4.5 2.2 91 36 15 3360 4.3 Spring 2012 6.65 1480 62.8 508 0.38 3.6 2.0 86 14 22 3350 4.6 Spring 2014 73 6.63 1400 58 460 1.00 3.4 2.1 80 15 3500 PS-1 1979 90.5 6.4 1828 75 518 0.9 3.9 2.5 95 16 16 3590 4.8 PS-1 1982 92 7.5 1720 60 511 0.9 4.7 2.3 94 30 19 3420 4.4 PS-1 1993 82 7.1 1560 65 545 0.6 4.2 2.4 90 20 7 3460 5.3 PS-1 2010 79 7.1 1530 61.6 519 1.21 3.5 2.2 83 27.8 14.3 3460 4.5 PS-2 1979 90 6.4 1820 75 516 0.9 3.9 2.3 101 19 15 3540 4.8 PS-2 1982 96 7.3 1510 57 516 0.9 4.7 2.3 92 26 19 3420 4.5 PS-3 1982 75 8.0 592 25 260 0.4 2.0 1.0 60 36 15 1430 1.3 PS-3 1993 65 6.8 1100 43 441 0.6 3.2 1.5 67 27 6 2450 2.9 PS-3 2010 67 7.0 1140 40.9 412 0.85 2.8 1.7 71 23.7 10.8 2650 3.0 PS-4 1982 48 8.6 115 4.8 23 0 0.3 0.5 35 80 11 284 0.5 PS-4 1993 45 8.6 146 7.8 98 0.2 0.2 0.2 27 48 1 386 0.3 PS-4 2010 44 8.52 152 5.9 73 0.14 0.5 28 34 9.4 353 0.4 PS-4 2013 44.6 8.47 128 5.5 45 0 0.4 0.2 29 39.9 1.5 9.3 260 0.6 PS-5 1993 32 9.6 36 1.1 2 0.2 0.1 0.6 21 81 5 6 0.5 PS-5 2010 30 9.6 36 1.09 1 0 0.1 20 49.6 5.4 2 0.5 MI-1 1982 22 9.7 16 0.5 5 0 0.1 21 37 9 5 0.2 MI-1 1993 31 8.3 29 1.5 23 0.6 0.2 0.1 20 32 10 66 0.2 MI-1 2010 29 7.8 130 4.4 93 0 0.5 21 25.8 9.5 337 0.2 PS 12-3 2012 65.5 7.52 731 29.9 281 0.78 1.8 1.0 51 30.6 8.2 1640 1.9 PS 13-1 (open to 1036 ft) 2013 70.5 7.51 537 26.1 236 0.4 1.4 0.8 54 25.1 9.3 1300 1.4 PS13-1 2013 77 7.27 1090 50.9 370 0.7 2.6 1.5 79 22.8 12.4 2500 3.3 76 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 43 Sample Date T°C pH Na K Ca Mg Li B SiO2 HCO3 CO3 SO4 CL F (shallow Completion) PS 13-1 300 gpm 2014 79 7.26 1000 35.0 250 2.0 1.5 59 18 2500 PS 13-1 60 gpm 2014 77 7.05 950 37.0 250 2.1 1.4 67 15 2300 PS 13-2 2013 71 8.95 124 25 49 0 0.3 0.2 62 39.4 11.1 5.8 265 0.5 PS 13-2 55 gpm 2014 69 7.52 53 3.1 9 0.2 0.1 54 62 5.5 65 PS 13-3 2013 79 7.27 1070 46.3 373 0.7 2.5 1.4 74 22.1 12.3 2424 3.0 PS 13-3 60 gpm 2014 78 6.97 920 37.0 280 2.2 1.3 66 16 2200 There is an obvious mixing trend between dilute cold groundwater, and primitive geothermal fluid, exemplified by sodium and chloride contents (Figure 36) and temperature (Figure 37) (Liss and Motyka, 1994). The same relationship is shown in cross plots involving all other chemical species except sulfate, which has more scatter. Flowing temperature profiles show little or no mixing of different fluids within the wellbores (Benoit et al., 2014b) and thin discrete aquifers with discrete chemistries that are supplying the PHS wells. The mixing trend shown in Figure 36 does not fall along the line of charge balance where sodium ions equal the chloride ions. The thermal fluid at PHS is deficient in sodium, and this deficiency is balanced by an abundance of calcium, causing the apparent mixing to diverge from the Na-Cl line. The calcium content of the primitive geothermal fluid is greater than 525 ppm, and exceptionally high when compared with most other low-salinity geothermal waters throughout the world. A major disappointment of recent exploration at PHS has been the inability to find the more optimistic temperatures predicted by geothermometry. The exceptionally high gas geothermometry values have always been viewed as questionable (Liss and Motyka, 1994), but the low magnesium content and the neutral chloride nature of the thermal fluid along with the Figure 36. The mixing trend between sodium and chloride is shown for all samples collected from the Pilgrim Hot Springs site. 0 500 1000 1500 2000 2500 3000 3500 4000 0 500 1000 1500 2000Chloride ppm Sodium ppm Pilgrim Springs Chemistry Hot Springs PS-1 PS-2 PS-3 PS-4 PS-5 MI-1 Lake NaCl equivalent line 77 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 44 quartz and the Na-K-1/3Ca geothermometry appeared to credibly predict temperatures of 130 to 145°C (266°F–293°F). To date, all drilling to depths as great as 1294 feet has resulted in a measured maximum temperature of only 91°C (196°F). To compound the frustration of this finding, temperature profiles in the deeper wells cannot be extrapolated to significantly greater depths to predict reliably where these higher temperatures may be present. Of course, it is always possible that higher temperatures are located at a much greater depth or lateral separation. However, other geothermometers might be more appropriate for PHS. The chalcedony geothermometer predicts subsurface temperatures of 99°C to 111°C (210°F–232°F), and the Na- K-4/3Ca geothermometer gives values near 120°C (248°F). The 120°C value is still 29°C above the maximum measured temperature and begs the question of whether the geothermometer is valid for the PGS brine chemistry. The 525 ppm of calcium in the PGS water is an obvious suspect in raising the question of whether thermal waters with exceptionally high calcium content provide accurate geothermometry calculations. 9. FLOW AND INTERFERENCE TESTING The first flow testing and interference testing of the PGS were performed in 1982, when well PS- 1 was flowed at 30 to 35 gpm and pressures were recorded in well PS-2. Type-curve matching of the drawdown gave an estimated permeability of 4.5 darcys (Economides et al., 1982). In 1982, the productivity of the wells ranged from 2.5 to 19 gpm/ft, and the transmissivity of the wells ranged from 300 to 40,000 gpd/ft (Kunze and Lofgren, 1982). Figure 37. Chloride content is shown along with well temperature. The PS-13-2 chloride content appears to be low, given its temperature. 0 10 20 30 40 50 60 70 80 90 100 0 1000 2000 3000 4000Sampling Temperature C Chloride ppm Pilgrim Springs Sampling Temperature versus Chloride Content Hot Springs PS-1 PS-2 PS-3 PS-4 PS-5 MI-1 13-1 13-2 ? PS 13-3 PS 12-3 78 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 45 9.1 Interference Testing of Wells PS-3, PS-4, and MI-1 Three interference tests using downhole temperature and pressure monitoring were performed in September 2013 (Benoit, 2013). The first test involved “static” pressure and temperature monitoring of well PS-3, with wells MI-1 and PS-4 being flowed with different start and stop times over a period of two and a quarter days. The second test involved flowing well PS-4 for 3 hours and monitoring wells PS-1 and PS-5. The third test was a mirror image of the first test, with well PS-3 being flowed for 3.5 hours and downhole pressure and temperature monitoring in wells PS-4 and MI-1. The interference tests conducted on September 7, 8, 9, 11, and 22 generally confirmed the observations made by Woodward-Clyde during their flow tests in 1982. Examples of the temperature and pressure responses during these tests are shown as Figure 38 and Figure 39. Wells PS-1 and PS-2, completed in the shallow thermal aquifer, do not quickly or obviously communicate with the deeper and cooler aquifers exposed in wells PS-3, 4, 5 and MI-1. More precise tools available in 2013 have shown that wells MI-1, PS-3, and PS-4 have a rapid but barely detectable pressure communication of 0.1 to 0.25 psi. This communication occurs at flow rates of 50 to 100 gpm from individual wells. This small pressure communication creates a much stronger and surprising temperature change in the static well PS-3 when wells MI-1 and PS-4 are flowed. The speed with which this temperature communication occurs indicates that the small changes in pressure create flow rate changes that quickly change the water flow past the tool in the “static” PS-3 well. More likely, the temperature changes are related to flow rates and mixing than to a single fluid entry changing its temperature. No obvious temperature changes appear in well PS-4 when PS-3 is flowed. Well MI-1 showed some small temperature changes when PS-3 was flowed, but these changes are not Figure 38. PS-3 downhole pressure during interference testing. 84 84.5 85 85.5 86 86.5 0 5 10 15 20 25 30 35 40 45 50 55Pressure at 59.35 Meters Below Flange (psig) Time (hours) PS-3 Downhole Pressure Record Sept. 7-9, 2013 Downhole Pressure Open MI-1 Reinstall pressure tool Shutin MI-1 Open PS-4 Shutin PS-4 79 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 46 as clearly related to starting and stopping PS-3 flow. Wells PS-3, PS-4, and MI-1 have relatively similar depth permeable intervals, which is a first-cut explanation for their measurable short-term communication. Some background temperature and pressure trends in the PHS wells are not understood and will require additional and/or longer-term monitoring to understand. The full flow-testing report for September 2013 is shown in Appendix H. 9.2 Interference Testing of PS-3, PS-13-1, and PS-13-3 Interference testing and flow testing of the 2013 wells were conducted twice about 6 months apart. The first testing occurred in February 2014 during a winter trip to the hot springs. The purpose of this trip was primarily for collecting equilibrated temperature logs of the 2013 wells, and time available for flow testing was limited. The temperature and pressure were monitored in wells PS-3, PS-13-1, and PS-13-3, while well PS-13-1 and later well PS-13-3 were allowed to flow at natural artesian rates of 50 to 70 gpm (Appendix I). Flows were visually estimated, as no flow metering was available. Well PS-13-3 was allowed to flow for just under 5 hours, and immediately after the flow was cut off, well PS-13-1 was opened and allowed to flow overnight for 12 hours. At artesian flow rates, the recorded pressure and temperature effects between the wells were extremely minimal, on the order of 0.2 psi and 0.02°C. In each well, productivity was approximately 20 gal/psi. Productivity will be discussed in further detail in the next section. 9.3 Flow Testing of PS-13-1 To date, the most significant flow test at the PGS was conducted between September 15 and 17, 2014, by airlifting well PS-13-1. The airlift was accomplished using thin-wall 1-inch-diameter aluminum tubing with a dispersion head on the bottom and an Atlas Copco trailer-mounted air compressor rated at 100 psi and 185 cfm. This hardware was supplied by Howard Trott of Potelco and rented locally in Nome. A 6-inch Krohne magnetic flow meter (magmeter), supplied by ACEP, was used to measure the flow rates. The surface equipment is shown in Figure 40. The Figure 39. PS-3 temperature response during 2013 interference testing. 75 75.5 76 76.5 77 77.5 78 78.5 79 0 5 10 15 20 25 30 35 40 45 50 55Temperature C Time (hours) PS-3 Downhole Temperature Record Sept. 7-9, 2013 Downhole Temperature Open MI-1 Reinstall pressure tool Shutin MI-1 Open PS-4 Shutin PS-4 80 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 47 5-inch-diameter dispersion head was backed up with 1/8 inch aircraft cable to prevent accidental loss of the downhole equipment in the well. The air-water mixture flowed with considerable turbulence into the first tank shown in Figure 40. As the water flowed into the second tank, no turbulence occurred, and the tank provided adequate head to push the water through the magmeter and out a 240-foot-long 6-inch PVC pipeline to flow through a hot springs pond, where the water cooled. The first airlift only lasted about an hour, as the flow was limited by a constriction in the flow line downstream of the second tank. Expansion of the flow line caused a short flexible hose to partially collapse, reducing the flow rate out of the second tank. This first test was more a test of the equipment than a test of the resource. The aluminum tubing was run to a depth of 12.2 m below the top of the standpipe (8.8 m below ground level). The average airlift flow rate during the first test was 172 gpm, and the magmeter readings were confirmed by measuring that it took 18 seconds to fill a 55-gallon drum from the discharge of the pipeline into the flow through a hot springs pond. Pumping at a higher air rate increased the flow rate to 177 gpm, but resulted in the water overflowing the top of the wellhead standpipe. While the well was being airlifted and the wellhead appeared to be stable, a Kuster tool was run to a depth of 30 m below the top of the master gate, with the heavier aircraft cable used as a backup in case the small 1/16-inch-diameter cable normally used on the reel was cut. The Kuster tool hung in the well just over a half hour before the air was cut off. Once the air was cut off, the well resumed its natural artesian flow of 55 gpm, and the Kuster tool remained hanging in the well overnight to record pressure buildup. There was no wing valve on the flow line to allow the well to be shut in Figure 40. Surface equipment used for the airlift of PS-13-1. The magmeter is in the silver spool between the black and white parts of the flow line. The black large-diameter hose serving as a standpipe on top of the wellhead was needed to prevent water from overflowing the top of the wellhead, which could not be sealed. The clamp holding the aluminum tubing is visible on top of the standpipe. The blue hoses are the air lines coming from the air compressor. 81 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 48 with the aluminum tubing and Kuster tool hanging inside it. On the morning of September 16, additional flow line parts were obtained in Nome, and the line was modified to remove the constriction. The aluminum tubing in the well was deepened from 12.2 m to 21.9 m below the top of the standpipe on the wellhead (18.6 m below ground level). This depth was about the maximum practical for one person on a large A-frame ladder to raise and lower the downhole equipment; it was also the maximum depth at which the on-hand larger- diameter aircraft cable could be used to hold and protect the Kuster tool. In the second test, there was adequate confidence to run the Kuster tool into the well under artesian flow conditions before starting the airlift. The air volume was quickly increased in three steps to find the maximum airlift rate that would not flow water out the top of the wellhead. This flow rate was about 300 gpm. The highest flow rate reported briefly by the magmeter was about 350 gpm. The 300 gpm airlifted flow rate was held for about 7.5 hours, until the air compressor was almost out of diesel fuel at 01:00 hours on September 17. After the compressor was shut off, the well continued artesian flow until after the Kuster tool was retrieved late in the morning on September 17. Also on that morning, the downhole hardware was pulled out of the well. Airlifting increased the scatter in the pressure and temperature data as compared with the unassisted artesian flow (Figure 41 and Figure 42). During the first airlift, it is unclear if there was any decline trend in the downhole pressure. The first 15 minutes of downhole data indicate a decline, but perhaps this was simply the tool equilibrating to the downhole conditions (Figure 42). During the second 15 minutes, no decline is evident. At 19:00, the amount of air being pumped was increased for 2 minutes to assess the plumbing system at higher flow rates and was then shut off (Figure 42). The amount flowing through the meter increased by only about 5 gpm to 177 gpm, but water occasionally geysered at the top of the wellhead. A constriction in the soft 6-inch hose between the two tanks limited the flow through the meter. The downhole flowing temperatures were measured below the air injection depth and, therefore, were not cooled by the air injection, as the surface-measured temperatures were. The maximum downhole temperature measured during the first airlift was 78.28°C (Figure 42). Immediately upon shutting off the air, the temperature took a 0.2°C decline and then quickly climbed for the next 13 minutes to its maximum value of 78.8°C, then quickly cooled. The temperature was down to 77°C when the tool was removed the following morning and showed a range of 1.7°C during this logging. During the airlift, the temperature increased slightly. After airlifting ceased, the bulk of the temperature change occurred, first with a short 0.2°C decrease, probably related to the short increased volume airlift, and then with a 0.8°C increase followed by a long decline until the temperature was about 1°C lower than during the airlifting. During this decline, the well was flowing under natural artesian conditions. This variation of temperatures with flow rates demonstrates that there is more than one feed zone for this well, with differing temperatures. Higher temperatures coincide with higher flow rates. A similar response was seen upon stopping the second airlift (Figure 43); however, this response lacked the sharp initial drop in temperature as seen at the end of the first airlift (Figure 42). The maximum temperature recorded after stopping the second airlift was 79.8°C, or 1.0°C hotter than seen after the first airlift stopped (Figure 41). After the second airlift was finished, the 82 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 49 artesian flow temperature declined to 76.9°C, about 0.25°C cooler than that seen after the end of the first airlift. Figure 42. PS-13-1 downhole pressure and temperature record just before and after stopping the first airlift at 19:02 hours on September 15, 2014. 77 77.2 77.4 77.6 77.8 78 78.2 78.4 78.6 78.8 79 37 38 39 40 41 42 43 44 9/15/2014 18:009/15/2014 18:159/15/2014 18:309/15/2014 18:459/15/2014 19:009/15/2014 19:159/15/2014 19:309/15/2014 19:459/15/2014 20:00Temperature C Pressure (psi) Date and Time PS-13-1 Monitoring at 30 m During and After First Airlift Pressure Temperature Increase air injection rate Stop First Airlift Figure 41. Downhole pressure and temperature record of PS-13-1 during the two airlifts. 76 76.5 77 77.5 78 78.5 79 79.5 80 36 38 40 42 44 46 48 50 9/15/2014 18:009/16/2014 0:009/16/2014 6:009/16/2014 12:009/16/2014 18:009/17/2014 0:009/17/2014 6:009/17/2014 12:00Temperature C Pressure (psi) Date and Time PS 13-1 Monitoring at +30 m During Airlifts September 15-17, 2014 Pressure Temperature stop airlift and start 300 gpm airlift stop 172 gpm airlift 83 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 50 This temperature variability points to a fairly complex interplay between two or more feed zones with differing temperatures. This idea led to a detailed flowing log run on the morning of September 18, before the well was shut in and the artesian flow was stopped. This artesian flowing log and a static log run on September 7, 2014, show some of the details of the fluid entry points (Figure 44). The flowing SMU log shows multiple sharp reversals in temperature gradient between depths of 56 and 67 m, which define all the possible fluid entry points. The top of the screen in the wells is at 57.3 m, which is in good agreement with the flowing temperature log. Due to minimal divergence between the flowing and static logs between depths of 65 and 67 m, any fluid entry point in that interval is suspect, as the temperature readings were not stable in that and shallower intervals. The deepest significant fluid entry is at a depth near 65 m, and the shallowest major entry as defined by temperature is near 60 m. All of the defined fluid-entry temperatures are between 77.02°C and 77.18°C on the flowing log. However, the static temperatures in this interval range from 77.4°C to 77.7°C. During airlifting, temperatures as high as 78.25°C to 79.3°C were measured, which had to have come from shallower depths in the well, perhaps as shallow as 35 or 40 m. This fluid would then have had to flow down the outside of the uncemented 14-inch casing and enter the screened interval between 57.3 and 72.5 m (see Appendix A for well schematic). The maximum temperature measured during the airlifting operations was the 79.8°C spike shortly after ceasing the airlift. This temperature is only 0.18°C hotter than the maximum measured tempeature of 79.62°C during the static log prior to flowing the well. Thus, we now have a good idea as to the origin of the fluid producing the temperature spike. Figure 43. Downhole pressure and temperature at the end of the second airlift at 01:00 hours on September 17, 2014. 76.5 77 77.5 78 78.5 79 79.5 80 36 38 40 42 44 46 48 50 9/17/2014 0:009/17/2014 0:309/17/2014 1:009/17/2014 1:309/17/2014 2:00Temperature C Pressure (psi) Date and Time PS-13-1 Monitoring at +31 m Depth at End of Second Airlift Pressure Temperature stop air lift and resumeartesian flow 84 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 51 It was decided that during the airlift the internal wellbore conditions would probably be too severe for the small SMU tool and its delicate electrical cable. The primary use of the Kuster tool was for pressure monitoring, so it was not moved during the airlifting. However, during any future airlift, a traversing Kuster survey should be run. Four major flow rate changes were monitored with downhole pressure changes in PS-13-1 during September 2014. The first was done on September 15, prior to the airlifting, and involved opening up the well so that it could artesian flow. During this flow, the rate was somewhere between 60 and 75 gpm, as measured with a 5-gallon bucket. Three major flow rate changes were then monitored during airlifting while the Kuster tool was downhole (Figure 41, Table 4) and the magmeter was providing the flow rate data. The first flow rate change was the cessation of the first airlift, the second was the start of the second airlift, and the third was the end of the second airlift. All of these changes had natural artesian flow either before or after. None of the changes involved the larger change of going from a static condition to the airlift. The productivity measurement involving the lowest flow rate and the smallest downhole pressure change was between 20.4 and 25.5 gpm/psi. The next largest flow rate change was at the end of the first airlift, and it produced a productivity value of 22.2 gpm/psi, the same as the average value of the cessation of artesian flow. The two largest flow rate changes at the start and stop of the second airlift give virtually identical and higher productivity values of 27.5 and 27.2 gpm/psi. Figure 44. Detailed flowing and static logs from PS-13-1 run in September 2014 with precision SMU logging equipment. The flowing log was run during artesian flows, and the depths were increased by 1.4 m to have exactly the same bottomhole depth as the static log, as this is the most important part of the hole for this discussion. 20 25 30 35 40 45 50 55 60 65 70 76.2 76.4 76.6 76.8 77 77.2 77.4 77.6 77.8 78 Depth (meters)Temperature C PS 13-1 Sept. 2014 Static and Flowing SMU Logs PS 13-1 9-7-14 Static SMU PS 13-1 9-18-14 Flowing SMUCemented CastingSolid CasingWell Screen85 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 52 These values are quite encouraging, as the well did not give lower productivity values as higher flow rate changes occurred, indicating that the well is capable of flowing at significantly higher rates. However, the values do not indicate that the temperatures seen during testing are sustainable over the long term. Table 4. Well productivity data Start Artesian Flow Stop First Airlift Start Second Airlift Stop Second Airlift Starting Flow Rate 0 172 65 300 Ending Flow Rate 60 – 75? 55 300 60? Change in Flow Rate 60 – 75? 117 235 240 Pressure Before Change 103.40 38.27 46.45 39.4 Pressure After Change 100.46 43.54 37.91 48.23 Change in Pressure 2.94 5.27 8.54 8.83 Productivity (gpm/psi) 20.4 – 25.5 22.2 27.5 27.2 The pressure record in PS-13-1 shows a 2 psi increase after 22:30 hours on September 16 (Figure 41). This increase reflects the thin cable holding the tool breaking, and the tool moving part of a meter downhole until it was held by the thicker aircraft cable, which turned out to be useful backup for the Kuster tool. 9.4 Temperature and Pressure Monitoring in PS-13-2 Two hours after the first airlift of well PS-13-1, a Kuster tool was hung in well PS-13-2 near a depth of 30 m to monitor its downhole temperature and pressure for a few days during the expected longer and more voluminous second airlift. This PS-13-2 record is exceptionally complex for a well that was not flowing (Figure 45). The start and stop of the second airlift is marked by sharp pressure changes of about 0.2 psi. No net longer-term pressure change occurred between the pressure prior to the airlift and pressures near the end of the monitoring period. During the airlift, a curious temperature increase and decline was recorded that requires a much deeper understanding of the hydrology to explain (Figure 45). Equally large or larger temperature changes occurred when the airlift was not in progress. 9.5 Temperature and Pressure Monitoring in PS-13-3 A Kuster tool was also hung in PS-13-3 after the first airlift of PS-13-1 to document the downhole pressure and temperature changes (Figure 46). This record shows a sharp 0.2 psi reaction to both the start and stop of the airlift. There is no longer-term net pressure change from the start of monitoring to the end. A tiny 0.05°C temperature rise was associated with the higher 86 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 53 flow that did not reverse after the airlift. Also, three tiny temperature spikes occurred after 20:00, close to one day apart, that are not understood. Figure 45. PS-13-2 pressure and temperature response during PS-13-1 flow testing. Figure 46. PS-13-3 pressure and temperature response during PS-13-1 flow testing. 70 70.5 71 71.5 72 72.5 73 42 42.2 42.4 42.6 42.8 43 43.2 43.4 43.6 43.8 44 9/15/2014 12:009/16/2014 0:009/16/2014 12:009/17/2014 0:009/17/2014 12:009/18/2014 0:009/18/2014 12:00Temperature CPressure (psig)Date and Time PS 13-2 Monitoring Sept. 15-18, 2014 During 300 gpm Airlift of PS 13-1 Pressure Start 300 gpm air lift Stop 300 gpm airlift Temperature Resume 60 gpm artesian flowFlowing 60 gpm artesian 78 78.1 78.2 78.3 78.4 78.5 78.6 78.7 78.8 78.9 79 51 51.1 51.2 51.3 51.4 51.5 51.6 51.7 51.8 51.9 52 9/15/2014 12:009/16/2014 0:009/16/2014 12:009/17/2014 0:009/17/2014 12:009/18/2014 0:009/18/2014 12:00Temperature CPressure (psig)Date and Time PS 13-3 Sept 15-18, 2014 Monitoring During 300 gpm Airlift of PS 13-1 Pressure Start 300 gpm Air lift Stop 300 gpm Air Lift Temperature Resume 60 gpm artesian flowFlowing 60 gpm artesian Flowing 300 gpm 87 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 54 9.6 Historic Hot Springs Temperature Monitoring A small Hobo brand temperature monitoring probe was placed in the discharge area in the historic hot spring pool at PHS during testing of the wells. The pool is located 750 feet northeast of well PS-13-1. During the testing period, the sensor was placed in the northwest corner of the pool, about 2 feet below the water surface (Figure 47). Researchers Chris Pike and Dick Benoit also used a presision temperature measuring probe owned by Southern Methodist University to measure temperatures in the bottom of the pool, inserting the probe several inches into the sandy bottom of the pool and recording the temperatures. A maximum temperature of 73°C (163°F) was encountered in the extreme eastern edge of the pool. The water temperature of the pool was monitored between September 9 and 18, 2014, with a brief interuption during the early morning hours of September 16 to download data. During the time that the temperature was being recorded, the hot spring pool was being used by the public for soaking and relaxation activities. Chris Pike, an ACEP staff member, monitored the temperature probe on a nightly basis to ensure that it was still in position. During a brief period Figure 47. The historic hot spring pool temperature was monitored during flow testing of PS- 13-1. 88 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 55 on September 12, the probe was removed from the spring. The data collected show that the pool temperature varied for unknown reasons, but mostly stayed between 38°C and 43°C (100°F– 110°F) (Figure 48). During the 300 gpm flow testing, the pool temperature dropped and did not stabilize and begin to rise again until after airlift pumping was stopped. During this time, the pool dropped to its coolest recorded temperature, below 34°C (94°F) (Figure 48). Further testing is needed to draw a difinitive correlation between the temperature of the hot spring pool and the flow of the wells. However, pumping of water from the shallow thermal aquifer likely impacts the flow of hot water into the pool. 9.7 Flow Testing Conclusions Well PS-13-1 was airlifted for over 7 hours at an average flow rate of 300 gpm, which represented about the largest flow that could have been achieved with available equipment. A Figure 48. Hot spring pool temperatures during the September 2014 flow testing. The lowest temperature recorded occurred when the greatest flow rates were being pumped from PS-13-1. 90 92 94 96 98 100 102 104 106 108 110 9/9/14 0:009/10/14 0:009/11/14 0:009/12/14 0:009/13/14 0:009/14/14 0:009/15/14 0:009/16/14 0:009/17/14 0:009/18/14 0:00Temperature (°F)Pilgrim Hot Springs Hot Pool Temperatures During Well Testing PS13-3 Flowing ~ 60 GPM Artesian PS13-1 Flowing ~60 GPM Artesian PS13-1 Flowing 300 GPM PS13-1 Flowing 172 GPM Erroneous Data Hourly Hot Pool Temeprature (°F) 89 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 56 longer flow test would have been more desireable, and help to better define the resource however, due to time and funding constraints it was not possible. We acknowledge this weakness and recommend future flow testing prior to substantial investment in anything other than small scale power generation. Repeated productivity measurements with flow rate changes of 60 to 240 gpm gave values of 20.4 to 27.5 gpm/psi which indicate a productive well. It is encouraging that the productivity values associated with the higher flow rates had the highest values. During the airlift, most of the fluid must have entered the wellbore in the main shallow thermal aquifer and flowed down through the sediments along the blank casing to enter the screened part of the well below 57.3 m. The airlift test impacted wells PS-13-2 and PS-13-3 nearby with a 0.2 psi pressure decline. Apparently, temperature impacts also occurred, but the indicators are not convincingly explicable with the available data. 10. PILGRIM GEOTHERMAL SYSTEM CONCEPTUAL MODEL 10.1 Conceptual Model History Conceptual speculation about the PGS dates to its first recorded visit by geologist G. A. Waring, who was interested in the geothermal system (Waring, 1917). Waring noted that the sulfate-to- chloride and the calcium-to-sodium ratios in the thermal water were much different from seawater and that the relatively high salinity was not due to “an admixture with sea water” (p.74). Also, Waring speculated that “beneath the river alluvium the bedrock may be gneiss, intruded by a granitic mass … the heated water rises along the fractured contact zone between the two kinds of rock”(p.75). Waring drew no schematic diagrams of the PGS. In the early 1970s, the USGS embarked on a program to improve the understanding of geothermal systems in the United States; it developed long-lasting conceptual understandings of the PGS even if it did not draw a specific conceptual model. In Alaska, Miller et al. (1975) assessed the geochemistry of many of the known springs and their regional geologic setting. In terms of regional setting, the proximal relationship between thermal springs and granitic plutons was recognized. Miller et al. (1975) presented the first stable isotope analysis of the Pilgrim thermal water, which showed the water to be derived from local rain and snowmelt. The thermal fluid is not a mixture of meteoric water and seawater. Miller et al. (1975) presented the first predicted PGS subsurface temperatures—137°C (279°F) based on the quartz geothermometer and 146°C (295°F) based on the Na-K-Ca geothermometer—and concluded that the thermal water must be at depths of 9000 to 15,000 feet (3.3 to 5.3 km) to reach these temperatures, based on a gradient of 30°C–50°C/km. Finally, Miller et al. (1975) observed that “most, if not all, of the hot springs are characterized by reservoirs of limited extent and relatively low temperatures in comparison with temperatures of geothermal systems presently being exploited for power generation”(p.12). The first conceptual model of the PGS was bravely put forth following the 1979 field season, with the focus on small-scale and very shallow convection cells and a water balance model (Osterkamp et al., 1980). The water balance model (Figure 14 from Osterkamp et al., 1980) allows for the possibility of rising hot water being impacted by subpermafrost cold recharge and 90 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 57 recirculation of thermal water. Various power estimates were made. The geothermometry from PHS and the first two wells drilled in late 1979 indicated the presence of a deeper and hotter 145°C–150°C (293°F–302°F) reservoir (Motyka et al., 1980). The second conceptual understanding of the PGS was developed in 1982 after the first six wells had been drilled and flow tested (Figure 3 from Economides, 1982). The primary result was the recognition of the shallow reservoir of laterally flowing thermal aquifer and the exceptionally bold conclusion was that “the existence of a hot water zone of about 150°C (302°F) and at a depth of around 5000 feet is now virtually certain” (Economides, 1982; Economides et al., 1982, p.30). In fact, a more specific depth of 4875 feet was stated, based on extrapolating the positive temperature gradients beneath the shallow thermal aquifer. The researchers also stated that “locating the hot water source for the shallow zone is relatively unimportant, since the fluid at depth provides a high temperature source formation extending aerially at least as far as the total area drilled” (p.28). Regrettably, the total area drilled by 1982 amounted to only a few square acres. Liss and Motyka (1994) relied upon geochemical data to suggest that Tertiary–Quaternary marine sediments might underlie PHS and that the PGS might have subsurface temperatures as hot as 190°C–230°C (374°F–446°F) based on a Mg-Li geothermometer and admittedly suspect noncondensible gas geothermometry. More recent drilling at PHS did not encounter Tertiary– Quaternary marine sediments. Liss and Motyka (1994) also noted a 3He/4He value of 0.9, which suggested a mantle component of helium. No work was performed on the PGS from 1993 until 2010. Following this nearly two-decade hiatus, Daanen et al. (2012) utilized the COMSOL Multiphysics finite element package to develop the first numerical model of the PGS. This modeling assumed steady-state conditions with an ongoing flow of cold water toward the geothermal system being required to maintain the high negative-temperature gradients beneath the shallow thermal aquifer. The model indicated that potentially 38 MW of thermal energy moves through the shallow groundwater system near PHS. Concurrently, Chittambakkam et al. (2013) utilized the TOUGH2 simulator and assumed similar steady-state conditions to estimate a total heat loss of 26 MW (Appendix N). Unfortunately, more recent geologic studies have brought new information to light which does not coincide with the results of these modeling efforts. In the case of Daanen et al. (2012), the observed vertical temperature distribution given in their Figure 3 shows no shallow lateral flow and implies that it should be possible to drill a well below PS-1 with near isothermal temperatures of 90°C (194°F), which was disproven by the drilling of well PS-13-3. In the case of Chittambakkam et al. (2013), their simulated temperatures in Figures 12 and 13 do not show 90°C water flowing from depth to the surface. Instead, there is an unexplained cooling and then reheating of the thermal upwelling. Benowitz et al. (2013) used thermochronology modeling to constrain the tectonic regime responsible for the PGS. They conclude that the thermal anomaly is related to the youthful extensional setting of the Kigluaik range front fault and is not thermally equilibrating, suggesting that the hottest temperatures have not been accessed (Appendix O). 91 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 58 Miller et al. (2013a) present the most complete and detailed conceptual picture of the upper 700 feet of the PGS (Figure 49). In their model, an areally restricted near-vertical thermal upwelling transmits 90°C water almost to the surface. There is a near-cylindrical thermal anomaly with a radius of 500 to 800 m extending outward from this upwelling that, by the distance of the temperature decline to 20°C (68°F), is basically vertical. Also shown in the Miller et al. (2013a) model (Figure 49) is a strong flow of cold groundwater beneath the shallow aquifer flowing toward the thermal upwelling from both east and west and then flowing north toward the Pilgrim River. This is the steady-state model wherein the thermal anomaly and static temperature profiles of the various wells could remain in the described condition for an indefinite period provided the relative flow rates of hot and cold water remain more or less constant. One other challenge for the model developed by Miller et al. (2013a) is that three recent wells drilled to locate thermal upwelling do not show it located where it is shown in the model (Benoit et al., 2014a). All subsurface temperature data acquired to date were used to create the plan view maps shown in Figure 8. These maps show temperature contours of the shallow thermal aquifer and the temperature minimum, measured from the deep wells. These data along with modifications to the Miller et al. (2013a) model were used to create Figure 51, which shows the current understanding of the PHS upwelling. The model in Figure 51 shows temperature contours across the thermal anomaly, using a northwest to southeast cross section. The upwelling is shown in the area northwest of PS-13-1, where no subsurface exploration has been attempted due to swampy conditions and challenging access. Numerous Geoprobe and temperature gradient holes south and east of PS-13-1 allow a Figure 49. Conceptual model from Miller et al. (2013a). 92 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 59 high degree of confidence in the subsurface temperatures. North and west of PS-13-1, no drilling activities have taken place, and the temperatures shown are estimates that could occur, based on the conditions given in the model. Glen et al. (2014) developed a more regional conceptual model of the overall geothermal system (Figure 50). This model consists of a diffuse downward flow of meteoric water through basement rocks, along range-bounding faults that separate the Kigluaik Mountains and Hen and Chickens Mountain from the Imuruk Basin. Hot fluid is shown diffusely rising through bedrock beneath the valley; it becomes focused in a narrow inferred northeast-trending structure that is diagonal across the basin, and then rises obliquely in a northeasterly direction. The proposed northeastward hot flow direction is largely based on a prominent gravity low southwest of PHS, which suggests 800 m depth to bedrock (Figure 22). Fluid then flows along the shallowing and narrowing bedrock contact toward the northeast, where close to the surface location of the hot springs it is further concentrated into north- and northeast-trending structures that allow it to rise steeply through approximately 300 m of clay-rich alluvium to the surface. This model is constrained by drill-hole data only in a small area near the hot springs. No temperature or quantitative depth distribution of the thermal fluid is shown in the Glen et al. conceptual model. Figure 50. Regional conceptual model cartoon from Glen et al. (2014). 93 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 60 The culmination of this report is to present as complete a conceptual model as possible of the PGS. This model uses to the maximum extent the previous efforts and covers the range from regional aspects to quite detailed local features within the thermal area. There is no doubt that the thermal fluid at PHS comes from a local meteoric source. Whether this fluid is recharged from the Kigluaik Mountains to the south or from the Pilgrim River Valley is unknown, as not enough local meteoric isotopic samples have been collected from these areas. Discriminating between these two possibilities will first require determining if there are measurable isotopic differences between precipitation falling on the south and north sides of the Kigluaik Mountains. Obviously, this information is of more academic than practical interest in trying to develop the PGS, which is why it was not pursued as an integral part of the recent exploration effort. To date, drilling efforts at PHS have been unsuccessful in finding the estimated subsurface temperatures of 140°C to 150°C (284°F–302°F) that have provided much of the impetus for extensive exploration of this location over the past 40 years. Perhaps the higher temperatures are a relatively large lateral distance away from the thermal springs or at much greater depths. If so, the direction to go is uncertain. Even if a location lateral to the thermal springs were known, the costs to access it by road would likely be high. Alternatively, perhaps the quartz and NA-K- 1/3Ca geothermometers may not have been appropriate for the PGS, and more conservative predictions, such as the chalcedony and Na-K-4/3Ca geothermometer, should have been used. In this case, the predicted subsurface temperatures would be near boiling at depth. Another possibility is that somehow the exceptionally high calcium content in the PHS water is impacting the accuracy of the cation geothermometers. A lower base temperature of perhaps 100°C (212°F) for the geothermal system does not require the meteoric water to descend to depths of 9000 to 15,000 feet, as calculated by Miller et al. (1975); it still would have to go as deep as 10,000 feet. Unfortunately, no background heat flow holes are anywhere near PHS to constrain the regional background temperature gradient. In west-central Alaska, Miller et al. (1975) observed that “apparently fracture systems were not developed or are not sufficiently open in well-foliated regionally metamorphosed rocks to allow deeply circulating hot water to gain access to the surface” (p.6). In the 40 years since this observation was first printed, very few producing geothermal fields have been hosted by foliated metamorphic rocks. The few examples of wells producing from foliated rocks are not highly productive. This makes it more challenging and risky to drill into the metamorphic bedrock beneath PHS to produce from fractured bedrock. To date, the bedrock samples recovered from PHS drilling have been metamorphic, not granitic. Granitic rocks and other volcanic and sedimentary rocks in west-central Alaska regularly host geothermal systems. However, no geophysical interpretation or discussion has yet argued granitic rocks are present beneath PHS. The structure(s) controlling the thermal fluid flow remain poorly understood, though there is agreement that the east–west-trending Kigluaik range-front fault is the dominant structure in the vicinity of the PGS, and is probably close to optimal orientation for the critical failure needed to create open space for thermal fluid flow. Structures trending north–south or northeast–southwest would be much less likely to pull apart to create the needed open space for fluid flow. Structures oriented in these less optimal directions would need to be in more complex local settings for 94 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 61 permeability. Intersections of single narrow faults present small targets and are unlikely to have enough areal extent for development as geothermal fields. This kind of geometry would require some second permeability, such as a connection to nearby permeable formations, to store enough fluid to develop a viable production/injection strategy. The dip of the Kigluaik range-front fault at depth is unknown, so it is highly speculative to draw it at a low enough angle for realistic penetration by a well near the thermal springs. If other east–west-trending faults are present beneath the Pilgrim Valley, they have not created a density contrast large enough to be recognized on the gravity map. It is interesting to speculate on the nature of the local structure or feature at PHS that is transmitting the thermal water from the top of the metamorphic rocks at 320 m to the surface. Nobody has yet described any surficial indication of such a structure, which must be either very young or somehow continuously active to maintain its permeability. Miller et al. (2013a) recognize a 1 m high north–south terrace that is near the west edge of the thermal anomaly near the postulated north–south-trending fault, but also note that the terrace could be the result of frost heaving. This feature must penetrate and keep open multiple layers of soft clay above the bedrock. It is difficult to describe a feature that has proven so elusive. The drilling and temperature results to date indicate this feature is most likely northwest of where drilling has occurred. If the zone of upwelling is located between the already drilled wells, then it is likely so small that whether it represents a viable target becomes a question. 10.2 Current Pilgrim Geothermal System Understanding With the background presented thus far, the conceptual model based on our current understanding of the PGS contains the following components: 1. Local meteoric water must travel to depths of 15,000 feet to provide a resource temperature of 150°C (302°F) if the regional temperature gradient is 30°C–50°C/km (Miller et al., 1975). If a lower resource temperature near 100°C (212°F) is present then the water may only need to travel as deep as 10,000 feet. Whether the cold water flows down a single fault in a concentrated manner or through myriad small fractures in bedrock is only of academic interest, as no developer’s activities are likely to impact this flow. 2. The area of the top hundred or so feet near the discharge point of the PGS has been quite well characterized. Some thermal water is actually able to reach the surface and discharge through the thermal springs. This water reaches the near surface with a temperature of 91°C (196°F). Some thermal water is discharged into a very shallow aquifer several feet or meters below the surface and spreads laterally over a fairly large area. Most of the thermal water is discharged through the shallow thermal aquifer near a depth of 100 feet. Most likely, this shallow aquifer is charged not too far to the northwest of well PS-13-1. Where the water that percolates through the shallow aquifer eventually travels is unknown, as this has not been the primary purpose of recent exploration. It is suspected, however that this water travels to local sloughs, natural hot springs, and the Pilgrim River. The amount of water discharged onto the surface and into the shallow subsurface amounts to about 20 to 40 MW thermal. 95 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 62 3. The nature of the feature or features allowing the thermal water to rise through the Quaternary alluvium is unknown. Individual faults or intersecting structures have been previously proposed, but as noted, the proposed ideas are somewhat questionable and nobody has yet strongly argued the case for these features. 4. The northeast thermal anomaly is real, but so little is known about it at this time that it is unclear if it is part of the same geothermal system as the PGS. If it is part of the same system, then the argument for a northeast-trending structure becomes stronger. If the northeast thermal anomaly is not actually part of the PGS, then the possible northeast trend might actually be misleading. 5. The sharply declining temperatures beneath the shallow thermal aquifer can be interpreted in two ways. A steady-state model requires that cold water be flowing beneath the shallow thermal aquifer to remove the heat. A transient model does not require such cold groundwater flow. Arguments against the steady-state model are based on two facts. First, the original static temperature profiles in the deeper wells were all very smooth and showed none of the complexity that moving water imparts to them. Once the wellbores connected various zones of permeability, then water movement in the static temperature profiles became obvious (Benoit et al., 2014b). Second, the hot and cold flowing water would be competing for the same permeability channels near the thermal upwelling, presumably in gravel and sandy layers. The thermal water clearly has enough pressure to flow up to the surface but there are no recognized cold springs near the thermal springs. If there were abundant cold water with artesian pressure coming from the Kigluaik Mountains, only a perfect seal or a near-perfect pressure balance could separate the two hydrologies. With the amount of gravel described by Miller et al. (2014a), this seems quite unlikely. An argument might be proposed that having 100 m of permafrost surrounding the thaw bulb offers the best available protection from invading cold water at shallow depths. To place the proceeding arguments into a picture, we know there must be a thermal upwelling, and by default, the most likely place for its location is a modest distance to the northwest of well PS-13-1 (Figure 51). The nature of the permeability in this channel is uncertain. Faults or fault intersections have been hypothesized, but no convincing evidence has been presented for verification. The thermal water must have circulated deeply within the metamorphic or metamorphic/granitic bedrock. It is not known at what depth the thermal water became concentrated into the focused flow we see near the surface. Whether it has diffusely flowed along the top of the bedrock or has risen as concentrated flow through the upper part of the bedrock is speculative. 96 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 63 Figure 51. The current conceptual model of Pilgrim Hot Springs as shown in a cross-sectional view looking from southwest to northeast. This model, which is based on all data acquired through September 2014, indicates that the main upwelling zone is in the swampy area northwest of PS-13-1. Bedrock is represented by the dashed horizontal line at approximately 320 m in depth. The dashed temperature contours represent areas where the temperatures have not been well measured. 97 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 64 11. EXPORTING GEOTHERMAL ENERGY TO NOME Like most rural areas of Alaska, Nome relies on a diesel microgrid for its electrical power. The diesel fuel that powers this grid is shipped long distances during a short period when the sea is ice free and is stored in bulk fuel storage tanks until it is used for home heating or electricity generation. Rural communities in Alaska face challenging logistics, limited infrastructure, and poor economies of scale. These factors coupled with high oil prices equate to expensive energy prices that make economic development challenging in many of Alaska’s rural communities. In 2008, the Nome Region Energy Assessment, funded by the U.S. Department of Energy and the National Energy Technology Laboratory, concluded that geothermal energy was a potentially economic option for the region, depending on the size of the power plant that the geothermal resource could support (Sheets et al., 2008). Following the success of the Chena Hot Springs project, a preliminary feasibility study was performed in conjunction with the Nome Regional Energy Assessment report (Dilley, 2007). To support landowners and the City of Nome in their decision-making process regarding possible development options, several studies related to the integration of 2 MW of geothermally generated electricity into the existing Nome grid and the economics of the project have been conducted in conjunction with the geothermal exploration described in this report. 11.1 Geothermal Power Economics In 2012, a private developer representing Potelco Power and Telecommunications expressed interest in developing a geothermal project at PHS. Potelco believed the project could be economically viable, and transmission infrastructure could be constructed between PHS and Nome if the resource could provide at least 2 MWe. Potelco created Pilgrim Geothermal LLC, under which development activities would take place. The City of Nome negotiated a power purchase agreement with Pilgrim Geothermal LLC to purchase 2 MW of geothermally generated electricity. To determine if this energy would be cheaper for their ratepayers than traditional electrical power generated with diesel generators, UAF economist Antony Scott modeled the price of Nome diesel versus the price of Arctic North Slope crude and then used this information to project possible future Nome diesel prices based on U.S. Department of Energy crude oil price predictions. The work provided a framework for decision makers as they weighed the pros and cons of integrating a geothermal generation source into the Nome grid. Indeed, from a utility point of view, the most compelling aspect of adding geothermal is the opportunity to reduce the price volatility that results from the fluctuating price of diesel (Scott, 2015). This was the first attempt to quantify diesel price risk in remote locations that receive only a few fuel deliveries per year. The full report is shown in Appendix Q. 11.2 Wind-Diesel-Geothermal Microgrid Modeling In 2013, Nome increased its nameplate wind power capacity to 2.7 MW to provide a portion of the annual average load of 4 MW. To model the effect of 2 MW of geothermal power, which had been negotiated as a take or pay power purchase agreement, UAF researchers created a time step simulation model using two years of Nome grid data. As with the economic analysis explained in 98 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 65 the previous section, the grid modeling was intended to serve as a guide to Nome decision makers as they decided if the integration of geothermally generated electricity was beneficial to the utility’s ratepayers. A non-load following 2 MWe geothermal generation scheme was modeled in conjunction with the installed wind and diesel capacity. The Nome utility wished to observe the effect of possible geothermal power on its ability to fully utilize the wind resource, which would soon be owned, maintained, and controlled by them, and minimize the wind that would need to be “dumped.” Researchers also modeled the utility’s ability to fully use the wind if it added smaller generators to the diesel powerhouse. According to VanderMeer and Mueller- Stoffels (2014), “adding to the diesel generator fleet to create smaller, more consistent differences between the combined capacities of diesel generator combinations resulted in less diverted wind energy, more displaced diesel generated energy, a higher diesel generator load factor, and more diesel generator switching” (p.4). This modeling allowed the utility to determine the value of adding geothermal generation, while still considering the decrease in performance due to increased switching and decreased load factor. 11.3 Transmission from Pilgrim Hot Springs to Nome The remote location of PHS, 60 miles north of Nome, complicates any future development of a power generation facility. While the site is accessible via road, the transmission infrastructure must be constructed from PHS to Nome if any power generated on-site is to be purchased and consumed in Nome. A transmission option that has been investigated in hopes of lowering the infrastructure cost of transmission in rural Alaska is a high-voltage direct current (HVDC) transmission line. Conventional alternating current (AC) transmission requires three- or four- wire transmission infrastructure, while HVDC transmission requires one or two wires. This could reduce cost through wire savings and reduced structural loads, requiring fewer poles and saving money in materials and construction time (Polar Consult Alaska, 2012). This research is discussed in detail in Appendix R. 12. LESSONS LEARNED The remote location of Pilgrim Hot Springs, short snow-free construction season, thick layer of Quaternary alluvial fill above the bedrock which included multiple permeable layers, and limited accessibility, necessitated careful operational planning. During the course of the research at Pilgrim Hot Springs it has become clear that some parts of the project were highly successful, and other elements of the project could have been done differently and more efficiently. Many of the lessons learned are detailed below in the hopes that future geothermal exploration in the area can benefit from this experience. These lessons learned include:  The combination of the aerial FLIR and optical remote sensing data used in conjunction with the geoprobe exploration was an efficient and relatively cost-effective way to define the extent and temperatures of the shallow thermal aquifer. A slightly larger geoprobe unit might have been able to consistently penetrate through the temperature maximum of the shallow thermal aquifer and enable data collection as deep as 200 feet without the need for a full drill rig. If this unit had been used in the springtime when temperatures were cool and the ground was still firm, exploration northwest of PS13-1 might have been possible. 99 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 66  FLIR surveys served the dual purpose of finding hot seeps and allowing the heat flux associated with the PGS to be modeled. Two surveys were performed, one in the spring and one in the fall time. The spring survey was the most useful for mapping areas of snowmelt that correspond to permafrost-free areas and anomalous vegetation growth not regularly found on the Seward Peninsula.  Flow testing wells at flow rates exceeding the natural artesian flows proved to be challenging at PHS given the remoteness of the location, cost limitations, and temperatures. Basic water well pumps were not rated for the temperatures encountered at Pilgrim and required a rig on site to install. The lightweight air lifting apparatus that was utilized worked very well, however it did require close monitoring and regular refueling every couple hours. Flowing the well at rates greater than 300 gpm would have required additional manpower and equipment. The 6-inch Krohne magnetic flow meter that was used during this flow test was extremely reliable, effective, and accurate as well as user friendly.  The 525 ppm of calcium in the Pilgrim water is an obvious suspect in raising the question of whether thermal waters with exceptionally high calcium contents provide accurate geothermometry calculations. Given the inability to encounter the temperatures predicted by established geothermometry techniques, additional research is warranted to see if there are other geothermal systems where high levels of calcium caused overly optimistic geothermometry estimates.  The drilling associated costs consumed the most time and financial resources. The legacy wellhead repairs allowed researchers to utilize the wells that were drilled in the 1970’s and 1980’s for temperature and flow testing, and improved our understanding of the field. In addition, we were able to characterize subtle long term changes that have occurred over time. The temperature gradient slim holes were an economic way to measure temperatures at the top of bedrock. Ideally one or two more additional slim holes would have been drilled near where PS13-1 was eventually drilled and northwest of this area to help guide the later drilling of the large diameter well capable of flowing large quantities of geothermal fluid.  The Alaska Oil and Gas Conservation Commission regulates geothermal exploration and drilling in the same way as oil and gas associated activities are regulated, regardless of depth, or the temperatures and pressures that one is likely to encounter. Applying the same standards that the oil and gas industry is bound to for low temperature geothermal exploration creates a situation where this type of exploration becomes cost prohibitive and disincentivizes the development of small geothermal resources. Revisiting the regulations associated with geothermal exploration in Alaska is warranted. 13. CONCLUSIONS Geothermal exploration at Pilgrim Hot Springs (PHS) has significantly increased the understanding of this resource and enabled the planning of possible next steps, which are being carried out at the time this report is being written.  Initial project planning included the consideration of helicopter supported drilling based on the belief that the area of upwelling could be north of the Pilgrim River. Slim hole drilling was able to define the edges of the shallow thermal aquifer and the depth of the 100 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal Geothermal Exploration of Pilgrim Hot Springs, 2010-2014 Final Report 67 deep aquifer at PHS. Bedrock was encountered on several occasions which had not occurred during previous drilling at the site.  The possible upwelling area was constrained by drilling and the most likely upwelling zone feeding PHS is located slightly northwest of well PS13-1 (Figure 51). This idea is supported by the plan view temperature maps in Figure 8, which describe the flow direction of the thermal fluids.  We continue to believe the site is capable of supporting two megawatts of electrical power generation. The economic viability of exporting this power to Nome remains a question that private industry is best suited to answer. Repeated productivity measurements of well PS13-1with flow rate changes of 60 to 240 gpm gave values of 20.4 to 27.5 gpm/psi which indicate good productivity. A longer flow test would have been more desireable, and helped to better define the resource, however, due to time and funding constraints it was not possible. We acknowledge this weakness and recommend future flow testing prior to substantial investment in anything other than small scale power generation.  The landowners at PHS are investigating different on-site development options and are currently moving forward with plans to begin producing agricultural products on the site. This could include the construction of greenhouses to produce food for export to local communities, tourism infrastructure, and community facilities. Traditionally, the export of geothermal power has occurred in the form of electricity; however, using the heat energy at PHS to grow food for the region could be a creative way to export the “energy” and supply a much-needed commodity that otherwise is shipped into the region. The high cost of food transported to the area is heavily impacted by the price of petroleum.  Pilgrim Geothermal, LLC has indicated that it is planning additional drilling activities to identify the future production-well location for a large-scale geothermal electric power plant. Future exploration could rely on angle drilling from the existing drill to access the northwest target area. 101 of 101 Kawerak-Pilgrim Hot Springs-REF Proposal